Australian FOREX Daily Outlook 04/03/2009

US Housing Data still weakening

CURRENCY TRADING SUMMARY – 4th March 2009 (00:30GMT)

·U.S. Dollar Trading (USD) weakened in Asia as traders covered shorts and stocks rallied off lows. The losses proved short lived though as US economic data continued to surprise to the downside. January Pending Home Sales fell -7.7% vs. -3% forecast. Fed Chief Bernanke also spoke to senators and painted a bleak picture of the US banking industry. Crude Oil closed up $1.50 ending the New York session at $41.65 per barrel. In US share markets, the Nasdaq was down -1.84 points or -0.15% whilst the Dow Jones fell -37 points or -0.55%. Looking ahead, January Non-Manufacturing for February expected at 41 vs. 42.9. Also released, February ADP National Employment expected at -610K vs. -522k previously.

·The Euro (EUR) bounced back above 1.2600 level as EUR/JPY buying emerged on the back of AUD/JPY buying after the RBA meeting. Gains topped out in Europe and fell back as US stocks reversed early positive sentiment. German January WPI fell -0.4% vs. -3% forecast. Overall the EUR/USD traded with a low of 1.2524 and a high of 1.2676 before closing the day at 1.2560. Looking ahead, February PMI forecast at 38.9 vs. 42.2.

·The Japanese Yen (JPY) broke back above 98 Yen as the market shrugged off weak stocks and resumed its march upward. AUD/JPY was especially buoyant and helped to pull all the crosses higher. The deterioration of the Japanese Export market is hurting Yen sentiment. Overall the USDJPY traded with a low of 97.05 and a high of 98.58 before closing the day around 98.30 in the New York session.

·The Sterling (GBP) tested 1.400 again as reports emerged that the BOE was considering Quantitative Easing as early as this month. The rebound from Heavy GBP/JPY buying was capped in Europe as February Construction PMI fell to a record low 27.8. The market is pricing in a 0.5% rate cut. Overall the GBP/USD traded with a low of 1.3987 and a high of 1.4157 before closing the day at 1.4040 in the New York session. Looking ahead, PMI Services forecast at 41.8 vs. 42.5 previously.

·The Australian Dollar (AUD) jumped off 0.6300 as retail sales beat forecasts at 0.2% in January vs. -0.5% previously. With stocks rallying off lows in Asia the upside came back into focus ahead of the RBA meeting. The RBA held at 3.25% in a surprise to many analysts and caused the AUD to rally past 0.6400 and test 0.6450 in the European session. Weak US stocks took the shine off Aussie and is now awaiting the Q4 GDP Wednesday . Overall the AUD/USD traded with a low of 0.6295 and a high of 0.6462 before closing the US session at 0.6380. Looking ahead, Q4 GDP forecast at 0.2% vs. 0.1% previously. UPDATE Q4 shocks market -0.5%

·Gold (XAU) tested the downside but fell short of the $900 target as ETF demand continued to slump. Overall trading with a low of USD$906 and high of USD$932 before ending the New York session at USD$916 an ounce.

·Euro – 1.2490

Initial support at 1.2425 (Nov 21 low) followed by 1.2389 (Nov 13 low). Initial resistance is now located at 1.2679 (Mar 3 low) at followed by 1.2751 (Feb 27 high)

·Yen – 98.50

Initial support is located at 96.86 (Feb 27 low) followed by 96.36 (Feb 25 low). Initial resistance is now at 98.71 (Feb 26 high) followed by 99.47 (Nov 10 high).

·Pound – 1.4025

Initial support at 1.3959 (Mar 2 low) followed by 1.3929 (Jan 27 low). Initial resistance is now at 1.4157 (Mar 3 high) followed by 1.4385 (Feb 26 high).

·Australian Dollar – 0.6325

Initial support at 0.6281 (Mar 3 low) followed by the 0.6249 (Feb 2 low). Initial resistance is now at 0.6463 (Mar 3 high) followed by 0.6482 (Feb 27 high).

·Gold – 915

Initial support at 922 (Mar 2 low) followed by 911 (Feb 11 low). Initial resistance is now at 963 (Feb 27 high) followed by 978 (Feb 25 high).