Australian FOREX Daily Outlook 03/07/2008

US ADP sounds jobs warning, Crude Oil spikes higher

CURRENCY TRADING SUMMARY – 3rd July 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was unable to sustain a mild bounce during the European session with markets reacting to a surprisingly negative ADP jobs report of -79K change in June. Forecasts of much more modest -20K have lead to concerns that June’s Nonfarm Payrolls initially expected at -60K could come in much lower. Compounding the Dollar weakness was this Weeks Crude Oil inventories report showing a drop of 2 million Barrels sending Crude Oil to new record highs. Equities remained under pressure slipping 20% below October’s highs indicating a bear market. In U.S. share markets, the NASDAQ was down 53 points (-2.30%) and the Dow Jones was down 166 points (-1.46%). Crude Oil closed up $2.60 ending the New York session at $143.57 per barrel. Looking ahead, June NonFarm Payrolls forecasted at -60K with an Unemployment rate of 5.4%. Weekly Jobless claims are expected to remain unchanged at 384K and the June ISM Non-Manufacturing Composite is seen at 51 slightly down from 51.7 in May.

·The Euro (EUR) rallied through resistance at 1.5850 as Oil jumped higher. May PPI came in strong at 1.2% m/m confirming inflation fears in the Eurozone. The Market shrugged off US President Bush’s comments about a strong Dollar policy. Overall the EUR/USD traded with a low of 1.5787 and a high of 1.5889 before closing the day at 1.5883 in the New York session. Looking ahead, May Eurozone Retail sales are expected to rise 0.5% after falling -0.6 in April. Also the ECB Rate Announcement widely expect to be a hike of 0.25% to 4.25%.

·The Japanese Yen (JPY) early weakness in the European session was quickly reversed by falling equities and US job data. Most of the crosses were able to track the Majors higher lead by the EUR/JPY regaining the 168 level. Overall the USDJPY traded with a low of 105.78 and a high of 106.78 before closing the day around 105.94 in the New York session.

·The Sterling (GBP) helped lower in the European session from Dovish comments from BoE member Bean highlighting the risks to the downside. Broad USD weakness helped the pair to bounce higher. Overall the GBP/USD traded with a low of 1.9890 and a high of 2.006 before closing the day at 1.9941 in the New York session. Looking ahead, June PMI service forecasted at 49.5.

·The Australian Dollar (AUD) received a boost from a better than expected May Retails Sales showing a bounce to 0.7% from April’s -0.2%. Strong commodities also helped to underpin. Overall the AUD/USD traded with a low of 0.9533 and a high 0.9551 before closing the day at 0.9620. Looking ahead, May Trade Balance expected at -900 Million. Update May Trade Balance at -957 Million deficit while April’s Trade Balance was revised up to a 12 Million surplus.

·Gold (XAU) gained inline with Oil’s surge after an early dip in the European Session. Overall trading with a low of USD$932 and high of USD$946 ending the New York session at USD$945 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.5880

Initial support at 1.5720 (June 27 low) followed by 1.5628 (June 26 low). Initial resistance is now located 1.5943 (channel top) at followed by 1.6019 (April 22 high).

·Yen – 106.00

Initial support is located at 104.99 (June 30 low) followed by 104.42 (Jun 9 low). Initial resistance is now at 106.78 (July 2 high) followed by 107.22 (Jun 27 high).

·Pound – 1.9905

Initial support at 1.9846 (July 2 low) followed by 1.9806 (Jun 27 low). Initial resistance is now at 2.0008 (July 1 high) followed by 2.0027 (Apr 21 high)

·Australian Dollar – 0.9615

Initial support at 0.9512 (July 1 low) followed by 0.9491 (June 20 low). Initial resistance is now at 0.9670 (Jun 30 high) followed by 0.9700 (Round number resistance).

·Gold – 943

Initial support at 910.6 (Jun 27 low) followed by 885.1 (Jun 26 low). Initial resistance is now at 946.4 (July 1 high) followed by 953.0 (April 17 high).