Australian FOREX Daily Outlook 16/09/2010

Japan Intervenes, USD/JPY Soars

CURRENCY TRADING SUMMARY (00:30 GMT)

U.S. Dollar Trading (USD) enjoyed heavy gains against the Yen and allowed some strength to overflow against other majors. August Industrial Production gained 0.2% as expected. Stocks managed small gains although momentum is slowing. In US stocks, DJIA +46 points closing at 10572, S&amp P +3 points closing at 1125 and NASDAQ +11 points closing at 2301. Looking ahead, Weekly Jobless Claims are forecast at 460k vs. 451k previously. August PPI is forecast at 0.3% vs. 0.2%m/m.

The Euro (EUR) fell back from the 1.3000 level on profit taking but was well supported all day on EUR/JPY buying. EUR/GBP did fall noticeably though as the Pound staged a resurgence. August Inflations was 1.0% y/y as expected. EUR/USD traded with a low of 1.2954 and a high of 1.3039 before closing at 1.3010. Looking ahead, August Inflation is forecast at is forecast at 0.2% vs. -0.3% previously.

The Japanese Yen (JPY) had the biggest move in the markets as the Ministry of Finance ordered intervention in the FX markets and this saw the yen sold aggressively all day. USD/JPY moved from 15 year lows at Y82.86 to surge 3%. Further intervention is on the cards as the MOF also spoke in the New York session that FX intervention was ongoing. Overall the USDJPY traded with a low of 82.86 and a high of 85.79 before closing the day around 85.60 in the New York session. Looking ahead, BOJ Governor Shirakawa Speaks.

The Sterling (GBP) played catch up with the risk rally over the last few weeks gaining against all the majors aggressively. Cable found resistance at 1.5650 and GBP/JPY rallied over 3 Yen towards Y134. Of concern was the rise is August unemployment by 2k. Overall the GBP/USD traded with a low of 1.5446 and a high of 1.5655 before closing the day at 1.5620 in the New York session. Looking ahead, September CBI Orders are forecast at -13 vs. -14 previously.

The Australian Dollar (AUD) pulled back as Japanese intervention inspired USD strength and profit taking on the Aussie after it traded at 2 year highs on Tuesday. AUD/JPY broke resistance at Y80 and is well supported form being the highest yielding currency in the market. Overall the AUD/USD traded with a low of 0.9341 and a high of 0.9432 before closing the US session at 0.9380.

Oil &amp Gold (XAU) was well supported at highs, consolidating recent gains on concerns more central banks will be printing money. Overall trading with a low of USD$1262 and high of USD $1272 before ending the New York session at USD$1267 an ounce. Oil fell quite heavily on the reopening of a damaged US-Canadian Pipeline. WTI Oil Closed -$0.78 at $76.02 a barrel.

TECHNICAL COMMENTARY

Euro – 1.3015

Initial support at 1.2588 (Aug 24 low) followed by 1.2434 (61.8% retrace of 1.1877-1.3334). Initial resistance is now located at 1.3033 (Aug 14 low) followed by 1.3187 (Aug 11 High)

Yen – 85.50

Initial support is located at 81.85 (May 1995 low) followed by 79.75 (Apr 1995 low). Initial resistance is now at 85.91 (Aug 30 high) followed by 86.70 (38.2% retrace of 92.89-81.88).

Pound – 1.5650

Initial support at 1.5297 (Sept 7 low) followed by 1.5125 (July 21 low). Initial resistance is now at 1.5588 (Big Figure) followed by 1.5713 (Aug 12 high).

Australian Dollar – 0.9385

Initial support at 0.9171 (Sept 9 low) followed by the 0.9055 (Sep 2 low). Initial resistance is now at 0.9458 (Apr 14 high) followed by 0.9500 (Round Number).

Gold – 1267

Initial support at 1232 (Aug 31 low) followed by 1210 (Aug 24 low). Initial resistance is now at 1275 (June 21 high) followed by 1300 (round number).

Oil – 75.70

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).

Written by Anthony Darvall