Australian FOREX Daily Outlook 07/01/2010

Oil and Gold Rally

CURRENCY TRADING SUMMARY – 7th January (00:30GMT)

U.S. Dollar Trading (USD) was on the back foot as commodities rallied and risk appetite remained strong. US data was slightly worse than expected with December Services ISM at 50.1 vs. 50.5 previously and ADP December National Employment at -84k vs. -73k forecast. FOMC minutes showed some members were concerned about withdrawing stimulus too quickly and that further expansion may be necessary if the economy falters. DJIA +1 points closing at 10573, S&amp P +1 points closing at 1137 and NASDAQ -7 points closing at 2301. Looking ahead, Weekly Jobless Claims forecast at 447k vs. 432k previously.

The Euro (EUR) dipped going into Europe on comments from ECB Stark that the EU would not bail out Greece. The Market quickly recovered however and as commodities pushed higher so did the Euro. EUR/GBP tested 0.9000 and EUR/JPY reclaimed Y133. Overall the EUR/USD traded with a low of 1.4280 and a high of 1.4436 before closing at 1.4405. Looking ahead, November Retail Sales forecast at 0.1% vs. 0.0% previously m/m.

The Japanese Yen (JPY) was very weak once again as the market bought crosses aggressively helping the USD/JPY to rally back above Y92. MoF Fujii will be replaced by Naoto Kan. Weak US data lead the USD/JPY rally to stall but the crosses led by the AUD/JPY remained buoyant. Overall the USDJPY traded with a low of 91.50 and a high of 92.76 before closing the day around 91.35 in the New York session.

The Sterling (GBP) underperformed the rest of the market with Cable pivoting 1.6000 unable break higher. GBP/AUD was the worst hit breaking below 1.7500 support as the slide continues. December PMI Services was at 56.8 vs. 56.6 forecast. Overall the GBP/USD traded with a low of 1.5936 and a high of 1.6067 before closing the day at 1.6010 in the New York session. Looking ahead, BOE Rate Announcement forecast to remain at 0.5%.

The Australian Dollar (AUD) rallied above 0.9200 on the back of the commodities rally. AUD/JPY also traded to 2009 highs as the rally picked up momentum. November Building Permits +5.9% vs. 3% forecast. EUR/AUD is on track to test 1.55 multi year support. Overall the AUD/USD traded with a low of 0.9097 and a high of 0.9219 before closing the US session at 0.9090. Looking ahead, November Trade Balance forecast at -1800mln vs. -2379mln. November Retail Sales forecast at 0.3%.

Oil &amp Gold (XAU) broke higher as the uptrend resumed. Overall trading with a low of USD$1116 and high of USD$1141 before ending the New York session at USD$1136 an ounce. Broke and closed above the key $82 level. Crude Oil was up $1.05 ending the New York session at $82.82.

TECHNICAL COMMENTARY

Euro – 1.4405

Initial support at 1.4258 (Jan 4 low) followed by 1.4218 (Dec 22 low). Initial resistance is now located at 1.4484 (Jan 5 high) followed by 1.4536 (Dec 17 low)

Yen – 92.35

Initial support is located at 91.26 (Jan 5 low) followed by 91.00 (Dec 22 low). Initial resistance is now at 92.74 (Jan 6 high) followed by 93.22 (Dec 18 High).

Pound – 1.6015

Initial support at 1.5833 (Dec 30 low) followed by 1.5708 (Oct 13 low). Initial resistance is now at 1.6154 (Jan 5 high) followed by 1.6241 (Jan 4 high).

Australian Dollar – 0.9210

Initial support at 0.9093 (Jan 5 low) followed by the 0.8939 (Jan 4 low). Initial resistance is now at 0.9247 (0.764 of 0.9406-0.8733) followed by 0.9323 (Dec 3 high).

Gold – 1135

Initial support at 1115 (Jan 5 low) followed by 1093 (Jan 4 low). Initial resistance is now at 1140 (Jan 6 high) followed by 1141 (Dec 17 high).

Oil – 83.20

Initial support at 82 (Major level) followed by 80.00 (Intraday Support). Initial resistance is now at 84.00 (Big Figure) followed by 85 (Major level).