Australian FOREX Daily Outlook 11/08/2008

Gold Plunges as USD continues rally.

CURRENCY TRADING SUMMARY – 12^th August 2008 (00:30GMT)

·U.S. Dollar Trading (USD) despite a brief relief rally from most of the majors early in the European session, the Dollar was buoyed by a crash in Gold and continued weakness in Oil, making some solid gains. With little economic data out markets continued with the recent theme of a global slowdown as other economies playing catch up with recent US weakness. In the U.S. share markets, the NASDAQ was up 25 points (1.07%) and the Dow Jones was up 48 points (0.40%). Crude Oil closed down $0.75 ending the New York session at $114.45 per barrel. Looking ahead, June trade Balance seen at -$61.5 Billion. August Economic sentiment is also released seen at 38.5 from 37.4.

·The Euro (EUR) led the rebound in Europe as ECB Liebscher’s hawkish comments were processed. The rally was short-lived however as selling pressure reemerged and Gold collapsed $30. German Wholesale prices posted 9.9%y/y in July its highest point in over a decade. Overall the EUR/USD traded with a low of 1.4880 and a high of 1.5084 before closing the day at 1.4910 in the New York session. Looking ahead, French CPI seen at -0.2% m/m in July after a rise of 0.4% in June.

·The Japanese Yen (JPY) once again struggled against the USD but made solid gains against most of the crosses as they fell in the Majors. USD/JPY continued to pivot the 110 level as cross selling capped. Overall the USDJPY traded with a low of 109.55 and a high of 110.40 before closing the day around 110.20 in the New York session. Looking ahead, June Industrial Output seen at -2%.

·The Sterling (GBP) waxed and waned with USD strength. UK July PPI showed a decline of -0.6% sparking hopes that inflation had peaked. June Trade balance was -7.7 Billion pounds vs. expectations of -7.4 Billion.Overall the GDP/USD traded with a low of 1.9067 and a high of 1.9256 before closing the day at 1.9100 in the New York session. Looking ahead, July CPI is expected at -0.3%. Also the Retail Price Index is forecast at 4.9%.

·The Australian Dollar (AUD) was unable to sustain an early European rally and broke to 6 month lows as gold fell heavily. AUD is leading the charge down against the USD and without a recovery in the commodity complex is struggling to find support. The RBA monetary statement tempered speculation of a 50bps cut in September with more neutral than expected commentary. Overall the AUD/USD traded with a low of 0.8789 and a high of 0.8952 before closing the US session at 0.8810.

·Gold (XAU) broke through the key support at $850 and immediately collapsed to $820. Ongoing USD strength and commodity weakness the cause of the capitulation. Overall trading with a low of USD$818.90 and high of USD$865.50 ending the New York session at USD$824 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.4880

Initial support at 1.4778 (Feb 26 low) followed by 1.4702 (Feb 21 low). Initial resistance is now located 1.5084 (Aug 8 low) at followed by 1.5284 (Aug 8 high).

·Yen – 110.20

Initial support is located at 109.14 (Aug 7 low) followed by 108.22 (Aug 6). Initial resistance is now at 110.39 (Aug 11 high) followed by 112.15 (Jan 2 high).

·Pound – 1.9075

Initial support at 1.8838 (Nov 15, 2006) followed by 1.8619 (61.8% retrace 1.7048 to 2.1161). Initial resistance is now at 1.257 (Aug 11 high) followed by 1.9338 (Jan 22 low).

·Australian Dollar – 0.9780

Initial support at 0.8769 (Jan 28 low) followed by 0.8700 (Jan 28). Initial resistance is now at 0.8952 (Aug 11 high) followed by 0.9074 (Aug 8 high).

·Gold – 805

Initial support at 800 (Big Figure) followed by 791. Initial resistance is now at 833.9 (Jan 2 low) followed by 846 (May 2 high).