Australian FOREX Daily Outlook 12/01/2010

December Dollar Gains Wound-back

CURRENCY TRADING SUMMARY –12th January (00:30GMT)

U.S. Dollar Trading (USD) the weak Dollar tone from Friday continued into the new week with Gold surging at the open and EUR/USD breaking above the key 1.4500 level. US stocks made fresh 2010 highs on the back of the weaker Dollar and low Interest rate outlook. DJIA +45 points closing at 10663, S&amp P +2 points closing at 1146 and NASDAQ -4 points closing at 2312. Looking ahead, November Trade balance forecast at -34.8bn vs. -32.9bn previously.

The Euro (EUR) broke above the key Psychological level at 1.4500 in Asia and held above for most of the day as the market turned on the USD. EUR/JPY gained with the major early on but when the USD/JPY started to slip in the US session, the cross slipped back to support at Y133.50. EUR/GBP continued to pivot the 0.9000 level but was well supported on dips. Overall the EUR/USD traded with a low of 1.4401 and a high of 1.4559 before closing at 1.4515.

The Japanese Yen (JPY) the major was under steady downside pressure for most of the day as the Dollar suffered a broad selloff and the US interest rate outlook became more dovish. Support was found under 0.9200 with the market searching for more direction from the return of Japan which was on holiday Monday. Overall the USDJPY traded with a low of 91.88 and a high of 92.69 before closing the day around 92.10 in the New York session. Looking ahead, November Current Account forecast at 62.8% y/y vs. 42.75 y/y previously.

The Sterling (GBP) found some buyers in early Europe to test the 1.6200 level by the start of the US session before sellers returned to push the pair back to 1.6100 support. GBP/JPY was especially heavy in the US session falling from Y149.60 to Y148.20. Overall the GBP/USD traded with a low of 1.6020 and a high of 1.6196 before closing the day at 1.6 100 in the New York session.

The Australian Dollar (AUD) made fresh 2010 highs above 0.9300 to test resistance from last year at 0.9330. AUD/JPY traded above Y86 before profit taking and most crosses remained very buoyant. Underpinning the Aussie was the large rally in Gold and continued strong risk appetite. Overall the AUD/USD traded with a low of 0.9247 and a high of 0.9328 before closing the US session at 0.9305.

Oil &amp Gold (XAU) opened $15 an ounce higher above $1150 at the start of Asia and remained well supported for the rest of the day. Overall trading with a low of USD$1137 and high of USD$1132 before ending the New York session at USD$1151 an ounce. Tested $84 a barrel before heavy profit taking set in. Crude Oil was down -$0.73 ending the New York session at $82.52.

TECHNICAL COMMENTARY

Euro – 1.4515

Initial support at 1.4258 (Jan 4 low) followed by 1.4218 (Dec 22 low). Initial resistance is now located at 1.4572 (0.382 of 1.5144-1.4218) followed by 1.4591 (Dec 16 high)

Yen – 92.15

Initial support is located at 91.88 (Jan 11 low) followed by 91.52 (Jan 6 low). Initial resistance is now at 93.77 (Jan 8 high) followed by 94.07 (Aug 28 high).

Pound – 1.6110

Initial support at 1.5897 (Jan 7 low) followed by 1.5833 (Dec 30 low). Initial resistance is now at 1.6241 (Jan 4 high) followed by 1.6341 (Dec 17 high).

Australian Dollar – 0.9305

Initial support at 0.9124 (Jan 8 low) followed by the 0.9093 (Jan 5 low). Initial resistance is now at 0.9406 (Nov 16 2009 high) followed by 0.9476 (July 31 08 high).

Gold – 1151

Initial support at 1119 (Jan 8) followed by 1115 (Jan 5 low). Initial resistance is now at 1168 (0.618 of 1226.56-1074.88) followed by 1190 (0.764 of 1226.56-1074.88).

Oil – 82.10

Initial support at 82.00 (Intraday support) followed by 80.00 (Intraday Support). Initial resistance is now at 84.00 (Jan 11 high) followed by 85 (Major level).