Australian FOREX Daily Outlook 02/07/2010

USD Tumbles on Weak Economic Data

CURRENCY TRADING SUMMARY – 2nd July (00:30 GMT)

U.S. Dollar Trading (USD) in a break with recent correlations the USD was sold off yesterday even as the stock markets came under heavy selling pressure at the start of US session. The movement was extreme especially on the Euro which gained more than 300 pips over a 12 hour period. Weekly Jobless Claims came in at 472k vs. 454k previously. In US stocks, DJIA -41 points closing at 9732, S&amp P -3 points closing at 1027 and NASDAQ -7 points closing at 2102. Looking ahead, June Non Farm Payrolls are forecast at -110k.vs 431k previously. June Unemployment Rate is forecast at 9.8% vs. 9.7%.

The Euro (EUR) surged for one it is best performances ever as European banking concerns retreated and US data showed considerable weakness remained in the world’s largest economy. June Eurozone PMI was unchanged at 55.6. EUR/JPY surged with the major back above the key Y110 level. EUR/USD traded with a low of 1.2192 and a high of 1.2542 before closing at 1.2510. UPDATE May EU Unemployment dropped to 10.0 vs. 10.1% previously.

The Japanese Yen (JPY) fell to multi month lows under Y87 before rebounding aggressively with the crosses and US stocks in the close. The longer term downtrend has taken control and with market is now waiting to see whether the Japanese government talks about intervention at these levels. Overall the USDJPY traded with a low of 86.95 and a high of 88.55 before closing the day around 88.00 in the New York session.

The Sterling (GBP) tracked the Euro beginning a major rally at the start of the European session that lasted for the rest of the day with pretty much no pullback. The weakness in the US stocks would normally have pushed the pound lower but the market was in no mood yesterday to sell cable. Overall the GBP/USD traded with a low of 1.4871 and a high of 1.5193 before closing the day at 1.5170 in the New York session.

The Australian Dollar (AUD) remained under pressure for most of the day falling to 0.8350 after the bad US data and struggling to tracked the Euro and the GBP with both GBP/AUD and EUR/AUD making larger moves higher. The bounce in US stocks into the close allowed AUD/JPY to surge back above Y74.May Retail Sales were at 0.2% vs. 0.6% previously. Overall the AUD/USD traded with a low of 0.8314 and a high of 0.8483 before closing the US session at 0.8450.

Oil &amp Gold (XAU) fell back as EUR/GOLD positions were liquidated on the easing European Banking crisis. Overall trading with a low of USD$1196 and high of USD$1244 before ending the New York session at USD$1210 an ounce. Oil struggled even in the weak USD environment as the global economic outlook remained weak. WTI Oil Closed -$2.68 at $72.95 a barrel.

TECHNICAL COMMENTARY

Euro – 1.2505

Initial support at 1.2194 (July 1 low) followed by 1.2045 (June 11 low). Initial resistance is now located at 1.2570 (0.382 of 1.3692-1.1877) followed by 1.2672 (May 21 high)

Yen – 88.00

Initial support is located at 86.97 (Jul 1 low) followed by 85.87 (Nov 30, 2009 low). Initial resistance is now at 89.42 (June 28 high) followed by 89.98 (June 24 high).

Pound – 1.5190

Initial support at 1.4803 (Jun 23 low) followed by 1.4646 (Jun 17 low). Initial resistance is now at 1.5219 (76.4% 0f 1.5524-1.4231) followed by 1.5391 (April 30 high).

Australian Dollar – 0.8475

Initial support at 0.8263 (June 9 low) followed by the 0.8067 (May 25 low). Initial resistance is now at 0. 8566 (June 30 high) followed by 0.8722 (June 29 high).

Gold – 1211

Initial support at 1196 (July 1 low) followed by 1185 (May 25 low). Initial resistance is now at 1244 (July 1 high) followed by 1265 (June 21 high).

Oil – 73.10

Initial support at 72.50 (Intraday Support) followed by 71.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 77.00 (Intraday Resistance).