Australian FOREX Daily Outlook 11/04/2008

BoE cuts rates, ECB remain hawkish. G7 Meeting over weekend.

CURRENCY TRADING SUMMARY – 11 APRIL 2008 (00:30GMT)

·U.S. Dollar Trading (USD) grinded higher on Thursday tracking equity markets and as expected rate announcements coming out of Europe. Commodity prices fell as investors returned to risk averse assets overnight. The US trade deficit for February widened more than forecasted to US$62.3 billion (5.7%), whilst initial jobless claims fell by a more than expected 53k to 357k. The Fed’s chairman, Ben Bernanke, spoke about financial stability in the U.S yesterday, making claims they will be proactive in finding a solution to the U.S financial instability. Despite the poor data coming from the U.S and claims from the International Monetary Fund (IMF) that the U.S is headed for a recession, U.S share markets gained with the Dow Jones closing 54 points up (0.4%), while the NASDAQ rallied 29 points (1.3%) following strong growth in technology stocks. Oil prices fell by US76c (0.7%) a barrel to US$110.11 following claims from a Saudi Arabian exporter that oil supplies were ample. Looking ahead, the Michigan Sentiment report is to be released on Friday for the Month of April with forecasts of little change from 69.5 in March to 69 to be expected for April. In other news, the G7 summit is being held over the weekend with credit worries being the hot topic, stay tuned for commentary on Monday.

·The Euro (EURO) had a volatile day surging to new record highs against the dollar and Sterling in the lead up to the ECB rate announcement, followed by a moderation after rates were unchanged at 4.00% as expected. ECB President Trichet emphasized that “upside risks to price stability prevail over the medium term,” which ultimately lead to the rates being unchanged. Trichet maintained his hawkish outlook for the Euro zone, describing the economic stability as “sound”, despite the financial markets turmoil causing “unusually high” uncertainty. The EURUSD traded at a high of 1.5914 and a low of 1.5725 before closing at 1.5742 in New York.

·The Japanese Yen (JPY) strengthened following Singapore’s central bank tightening monetary policy on Thursday in a surprise move. The USDJPY traded at a high of 102.05 and a low of 100.03, before closing at 101.88.

·The Sterling (GBP) fell slightly on Thursday following the expected BoE rate announcement of a cut of 25bps to 5.00%, the central bank’s third rate cut in 5 months. In the accompanying statement, the BoE attributed the rate cut to growing concerns over the credit markets and the prospect of a deterioration in output growth for the second half of 2008. Inflation was a secondary consideration in this decision as committee judges conceded inflation would remain above the 2% target. The GBPUSD traded at a high of 1.9842 and a low of 1.9708 before closing at 1.9723 in New York.

·The Australian Dollar (AUD) traded sideways as investors were reluctant to heavily deal in the currency as they waited for rate announcements coming out of Europe. The AUDUSD traded at a high 0.9346 and a low of 0.9278 before closing at 0.9327 in New York. No data is to be released on Friday as we wait for the G7 summit over the weekend.

·Gold (XAU) eased on Thursday as a stronger greenback weakened the purchasing power of buyers around the world. Prices dropped by US$5.70 (0.6%) to US$931.80.

TECHNICAL COMMENTARY

·Euro – 1.5740

Initial support at 1.5726 (Apr 10 low) followed by 1.5684 (Apr 9 Low). Initial resistance is now located at 1.5914 (Apr 10 high) followed by 1.600 (psychological resistance).

·Yen – 102.00

Initial support is located at 100.03 (Apr 10 low) followed by 99.36 (50% retracement of the 95.76 to 102.95 advance). Initial resistance is now at 102.84 (Apr 10 high) followed by 102.95 (Apr 3 reaction high).

·Pound – 1.9715

Initial support at 1.9707 (Apr 10 low) followed by 1.9651 (Apr 9 low). Initial resistance is now at 1.9843 (Apr 10 high) followed by 1.9928 (Apr 8 high).

·Australian Dollar – 0.9320

Initial support a 0.9243 (Apr 8 low) followed by 0.9177 (Apr 7 low). Initial resistance is now at 0.9354 (Mar 19 high) followed by 0.9473 (Mar 13 high).

·Gold – 929.00

Initial support at 921.80 (Apr 10 low) followed by 903.40 (Apr 9 low). Initial resistance is now at 940.60 (Mar 31 high) followed by 954.98 (Mar 26 high).