Australian FOREX Daily Outlook 14/09/2010

Banks Rally on New Capital Rules

CURRENCY TRADING SUMMARY – 14th September (00:30 GMT)

Written by Anthony Darvall

U.S. Dollar Trading (USD) with little economic data released yesterday the market continued with its upward trend on stockmarkets and sold the USD across the board. Banks in particular did well around the Globe on weekend news of new banking capital rules to help insure financial stability. In US stocks, DJIA +81 points closing at 10544, S&amp P +12 points closing at 1121 and NASDAQ +43 points closing at 2285. Looking ahead, August Retail Sales forecast at 0.3% vs. 0.2% previously.

The Euro (EUR) rallied from the open to hit day highs just under 1.2900 in major move higher. Sentiment towards European banks improved with the new Basel III capital rules and allowed the underperforming major to take part in the ‘risk on’ rally. EUR/USD traded with a low of 1.2758 and a high of 1.2894 before closing at 1.2865. Looking ahead, July Industrial Production is forecast at 0.2% vs. -0.1% previously. Also released, September German Zew Current Conditions forecast at 48 vs. 44.3 previously.

The Japanese Yen (JPY) Dollar weakness saw the USD/JPY push lower in Asia but the crosses were able to maintain levels on strong buying with EUR/JPY and AUD/JPY finishing higher. Today there is a DPJ leadership battle with the possibility on a new PM who may favor more direct intervention action. Overall the USDJPY traded with a low of 83.50 and a high of 84.31 before closing the day around 83.65 in the New York session. Revised July Industrial Output previously at -1.1%.

The Sterling (GBP) attempted to rally with the Euro at the start of the European session but was once again sold and the crosses took advantage of this weakness. GBP/JPY fell below Y129 and EUR/GBP pushed towards 0.8360. Overall the GBP/USD traded with a low of 1.5383 and a high of 1.5490 before closing the day at 1.5410 in the New York session. Looking ahead, August CPI is forecast at 0.3% m/m vs. -0.2% previously. UPDATE AUG RICS House Price -32 vs. -8 in July.

The Australian Dollar (AUD) started strong and moved higher until the US session where resistance was found at 0.9360. Year highs at 0.9390 are under threat with bulls targeting 0.9500 in the medium term on improving investor sentiment and risk taking. Overall the AUD/USD traded with a low of 0.9292 and a high of 0.9365 before closing the US session at 0.9340. Looking ahead, August NAB Business Confidence.

Oil &amp Gold (XAU) found support and ticked higher into the close. Overall trading with a low of USD$1240 and high of USD $1251 before ending the New York session at USD$1249 an ounce. Oil extended Friday’s rally tracking stocks higher. WTI Oil Closed +$0.74 at $77.20 a barrel.

TECHNICAL COMMENTARY

Euro – 1.2865

Initial support at 1.2588 (Aug 24 low) followed by 1.2434 (61.8% retrace of 1.1877-1.3334). Initial resistance is now located at 1.2933 (Aug 12 low) followed by 1.3000 (Big figure Resistance)

Yen – 83.60

Initial support is located at 83.35 (Sept 8 low) followed by 81.85 (May 1995 low). Initial resistance is now at 85.23 (Sept 3 high) followed by 86.36 (Aug 13 high).

Pound – 1.5385

Initial support at 1.5297 (Sept 7 low) followed by 1.5125 (July 21 low). Initial resistance is now at 1.5500 (Big Figure) followed by 1.5713 (Aug 12 high).

Australian Dollar – 0.9335

Initial support at 0.9055 (Sept 2 low) followed by the 0.8771 (Aug 25 low). Initial resistance is now at 0.9389 (Apr 12 high) followed by 0.9500 (Round Number).

Gold – 1250

Initial support at 1232 (Aug 31 low) followed by 1210 (Aug 24 low). Initial resistance is now at 1265 (June 21 high) followed by 1300 (round number).

Oil – 77.30

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).