Australian FOREX Daily Outlook 05/03/2009

China Stimulus Helps Market off lows

CURRENCY TRADING SUMMARY – 5th March 2009 (00:30GMT)

·U.S. Dollar Trading (USD) hit new multi-month highs in early Asia as Australia GDP surprised to the downside and the Euro broke through 1.25. The stock market then stabilized and actually started to gain as rumors swept the market of a new Chinese stimulus package. On the same subject Chinese PMI increased to 49 from 45 last month and added to speculation China may rebound from the current slowdown. January Non-Manufacturing for February came in at 41.6 vs. 42.9 previously. February ADP National Employment at -697K vs. -522K previously. Crude Oil closed up $3.73 ending the New York session at $45.38 per barrel. In US share markets, the Nasdaq was up 32 points or 2.48% whilst the Dow Jones gained 149 points or 2.23%. Looking ahead, Weekly Jobless Claims forecast at 650K vs. 667K previously.

·The Euro (EUR) took out large stops under 1.25 to hit new 3 month lows before the china story took hold dragging the pair higher with US stocks. February PMI was revised slightly higher to 39.2 from 38.9. Overall the EUR/USD traded with a low of 1.2459 and a high of 1.2663 before closing the day at 1.2640. Looking ahead, German Retail Prices seen +0.2% in January. Also released, ECB Rate Announcement forecast to cut 0.5% from 2.0% from 1.5%.

·The Japanese Yen (JPY) held in a tight range until early Europe when 99 was broken for the first time in 4 months. Buoyant stocks helped the crosses to stage massive rallies with the largest the AUD/JPY up over 4% off lows. 100 Yen is now firmly in the markets radar and many analysts suggest a test of this level is inevitable. Overall the USDJPY traded with a low of 98.22 and a high of 99.47 before closing the day around 99.20 in the New York session. Looking ahead, Business Capex forecast at -16.6% in Q4.

·The Sterling (GBP) once again bounce off the 1.400 level as USD was at maximum strength in Asia before rebounding sharply to 1.4200 on GBP/JPY buying. Overall the GBP/USD traded with a low of 1.3987 and a high of 1.4198 before closing the day at 1.4140 in the New York session. Looking ahead, BoE is Expected to cut by 0.5% from 1% to 0.5%. Halifax HPI forecast at -2% vs. -1.9% previously.

·The Australian Dollar (AUD) had a very volatile trading session with Q4 GDP shocking the market by falling -0.5% vs. 0.2% positive. The market tested support at .6290 before rebounding strongly on the ‘china trade’ story which positively affects the AUD. Overall the AUD/USD traded with a low of 0.6289 and a high of 0.6520 before closing the US session at 0.6490. Looking ahead, January Building Permits forecast at 1.65 and Trade Balance forecast a 1.2Bn.

·Gold (XAU) tested the $900 level before recovering slightly as risk appetite reduced gold demand. Overall trading with a low of USD$900 and high of USD$922 before ending the New York session at USD$909 an ounce.

·Euro – 1.2650

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 – 99.05

Initial support is located at 98.13 (Mar 4 low) followed by 96.36 (Feb 27 low). Initial resistance is now at 100.57 (Oct 22 high) followed by 102.41 (Oct 20 high).

·Pound – 1.4175

Initial support at 1.3957 (Mar 2 low) followed by 1.3929 (Jan 27 low). Initial resistance is now at 1.4195 (Mar 4 high) followed by 1.4385 (Feb 26 high).

·Australian Dollar – 0.6470

Initial support at 0.6287 (Mar 3 low) followed by the 0.6249 (Feb 2 low). Initial resistance is now at 0.6527 (Mar 4 high) followed by 0.6555 (Feb 25 high).

·Gold – 908

Initial support at 891 (Feb 9 low) followed by 874 (Jan 29 low). Initial resistance is now at 963 (Feb 27 high) followed by 978 (Feb 25 high).