Australian FOREX Daily Outlook 01/09/2008

Stocks drop as market awaits Gustav

CURRENCY TRADING SUMMARY – 1st September 2008 (00:30GMT)

·U.S. Dollar Trading (USD) under pressure most of the trading day as Oil rose on Gustav fears. Strong US data allowed the Dollar to reverse losses into the weekend helped as Oil pared gains. Chicago PMI showed a major bounce to 57.9 in August from 50.1 forecast. The University of Michigan Consumer sentiment continued to recover showing a final reading of 63.0. On the downside Personal Income showed a sharp decrease in July to -0.7% vs. -0.1% expected. In the U.S. share markets, the NASDAQ was up down 44 points (-1.83%) and the Dow Jones was up 171 points (-1.47%). Crude Oil closed down $-0.13 ending the New York session at $115.46 per barrel. Looking ahead, Labour Day Public Holiday in the US.

·The Euro (EUR) tracked Oil movements closely gaining as oil rose to over $118 a barrel but fell heavily as Oil came off and US data supported. August CPI showed a drop to 3.8% as Energy prices dropped. Consumer Confidence remained low at -19 vs. -20 in July. Overall the EUR/USD traded with a low of 1.4640 and a high of 1.4768 before closing the day at 1.4675 in the New York session. Looking ahead, German Retail Sales are seen down -0.1% in July from -1.4% in June. Final Eurozone August PMI is expected to remain 47.5.

·The Japanese Yen (JPY) was the big gainer as multiple resistances were taken out and risk aversion spikedon another US bank closure. EUR/JPY broke below 160 and GBP/JPY broke below 200. Stronger Japanese Data also supported. July Retail Sales jumped to 1.9% from 0.3% in June and 1.3% expected. July Industrial Production also bounced to +0.9% from -2.2% previously. Overall the USDJPY traded with a low of 108.42 and a high of 109.97 before closing the day around 108.80 in the New York session.

·The Sterling (GBP) was again the big loser as GBP/USD hit multi year lows and EUR/GBP hit all time highs. Continuing bad press and talk of recession is leaving the pound with little friends in the market. Overall the GDP/USD traded with a low of 1.8173 and a high of 1.8344 before closing the day at 1.8210 in the New York session. Looking ahead, August Service PMI is expected to remain poor at 44 down from 44.3 in July. Also released the July Consumer Credit expected to fall to .80 Billion from .87 Billion in June.

·The Australian Dollar (AUD) gained as Oil and Gold increased but was sold sharply as Risk aversion spiked and heavy AUD/JPY selling weighed. The market has kept the current range all week as it waits for the next RBA rate decision. Overall the AUD/USD traded with a low of 0.8555 and a high of 0.8658 before closing the US session at 0.8580.

·Gold (XAU) was well supported as safe haven buying increased and Oil also remained bid. Overall trading with a low of USD$829.90 and high of USD$838 before ending the New York session at USD$832 an ounce.

·Euro – 1.4700

Initial support at 1.4654 (Aug 29 low) followed by 1.4634 (Aug 27 low). Initial resistance is now located at 1.4811 (Aug 28 high) at followed by 1.4908 (Aug 21 high).

·Yen – 108.45

Initial support is located at 108.42 (Aug 29 low) followed by 108.3 (Aug 21 low). Initial resistance is now at 109.89 (Aug 27 high) followed by 110.29 (Aug 25 high).

·Pound – 1.8120

Initial support at 1.8091 (Jun 29 2006 low) followed by 1.8000 (Big Number). Initial resistance is now at 1.8187 (Aug 29 high) followed by 1.8344 (Aug 27 high).

·Australian Dollar – 0.8575

Initial support at 0.8555 (Aug 29 low) followed by 0.8532 (Aug 27 low). Initial resistance is now at 0.8694 (Aug 28 High) followed by 0.8814 (Aug 25 high).

·Gold – 834

Initial support at 807.40 (Aug 22 low) followed by 801 (Aug 20 low). Initial resistance is now at 844.0 (Aug 28 high) followed by 846 (Former May 2 support).