Australian FOREX Daily Outlook 12/12/2008

USD slides as demand dries up

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

·U.S. Dollar Trading (USD) in a very important trading day, key levels against multiple currencies were broken as USD selling accelerated to near panic capitulation levels. US data didn’t help the situation with weekly Jobless claims jumping to 573K vs. 509k previously. The October Trade Balance also weakened to -57.2Bn vs. -53.5Bn expected. Huge Trade deficits and 1% interest rates are undermining the USD going forward. As markets calm, safe haven flows and deleveraging demand for the USD has decreased (for the moment). Also hurting the Dollar yesterday was massive gains in Commodities. Oil surged as OPEC members talked about cutting supply. In U.S. share markets, the NASDAQ was down 57 points (-3.68%) and the Dow Jones was down 196 points (-2.24%). Crude Oil closed up $4.46 ending the New York session at $47.98 per barrel. Looking ahead, US Retail Sales for November seen at -1.9% vs. -2.8%. Also released November PPI seen at -2% vs. -2.8%.

·The Euro (EUR) in a dramatic move overnight key technical levels at 1.3080 and 1.3290 were erased leaving the market long and bullish as USD selling accelerated. The Euro was the standout gaining against all other majors receiving a major boost from Oil Jumping 10%. Also helping the Euro to retain these gains was ECB member Weber warning that the cutting cycle may be nearing its end. EUR/GBP tested resistance at .8900 as the Euro outperformed the Pound. Overall the EUR/USD traded with a low of 1.3007 and a high of 1.3405 before closing the day at 1.3340. Looking ahead, October Industrial Production is released expected to fall -1% vs. -1.6% previously.

·The Japanese Yen (JPY) gained against the USD but was mixed against the other majors which also gained heavily. Weakness in stocks helped to bring crosses down into the close. Overall the USDJPY traded with a low of 91.18 and a high of 92.84 before closing the day around 91.50 in the New York session.

·The Sterling (GBP) gained as the USD lost value but was left behind by most of the majors. Heavy EUR/GBP buying continues to weigh and the large stock falls out of the US weighed on the GBP/JPY. December CBI Orders beat expectations at -35 vs. -44 forecast but is still at very low levels. Overall the GDP/USD traded with a low of 1.4796 and a high of 1.5078 before closing the day at 1.5010 in the New York session.

·The Australian Dollar (AUD) was very well supported as it tracked the EURO and commodities higher. Resistance at 0.6680 was removed and the pair quickly rallied to the 0.6800 barrier. November Unemployment data was at expectations of -15.6K jobs and a 4.4% Unemployment Rate. Overall the AUD/USD traded with a low of 0.6550 and a high of 0.6800 before closing the US session at 0.6720.

·Gold (XAU) surged as Oil was bought up and the USD was broadly sold. The $830 level proved tough resistance and weakness in stocks dragged the precious metal down from highs into the close of the day. Overall trading with a low of USD$802 and high of USD$834 before ending the New York session at USD$821 an ounce.

·Euro – 1.3340

Initial support at 1.300 (Dec 11 low) followed by 1.2903 (Dec 10 low). Initial resistance is now located at 1.3405 (Dec 11 high) at followed by 1.3530 (Oct 20 high)

·Yen – 91.55

Initial support is located at 90.92 (Oct 24 low) followed by 88.07 (Range Projection). Initial resistance is now at 92.88 (Dec 9 high) followed by 93.07 (Dec 9 high).

·Pound – 1.5020

Initial support at 1.4736 (Dec 10 low) followed by 1.4679 (Dec 9 low). Initial resistance is now at 1.5082 (Dec 11 high) followed by 1.5213 (Nov 26 high).

·Australian Dollar – 0.6705

Initial support at 0.6522 (Dec 10 low) followed by the 0.6453 (Dec 8 low). Initial resistance is now at 0.6801 (Dec 11 high) followed by 0.6986 (Nov 10 high).

·Gold – 822

Initial support at 774 (Dec 10 low) followed by 763 (Dec 9 low). Initial resistance is now at 856 (Oct 15 high) followed by 871 (Oct 13 high).