Australian FOREX Daily Outlook 15/02/2010

China hikes banks reserve ratio by 0.5%

CURRENCY TRADING SUMMARY – 15th February (00:30GMT)

U.S. Dollar Trading (USD) experienced waves of strength but ended on a weak note as US stocks rebounded off lows into the weekend. Helping the Dollar to strengthen in Europe was news that China had lifted it’s bank reserve ratio by 0.5% for the second time in a month. Also Dampening spirits was an unexpected drop in February Consumer Confidence to 73.7 vs. 75 forecast. January Retail Sales were strong however at +0.5% vs. +0.3% forecast. In US stocks DJIA -45 points closing at 10099, S&amp P -3 points closing at 1075 and NASDAQ +6 points closing at 2183. Looking ahead, US Bank Holiday today.

The Euro (EUR) took a tumble on weak GDP numbers as Q4 German GDP disappointed at 0.0% vs. 0.2% and EUR Q4 GDP at 0.1% vs. 0.4% forecast. This combined with the Chinese rate hike sent the pair to new 9 month lows below 1.3550. EUR/GBP was able to capitalize on the Euro weakness to break through 0.8700 support. Overall the EUR/USD traded with a low of 1.3533 and a high of 1.3696 before closing at 1.3609. Looking ahead, continued EU meetings to discuss the Greece Debt situation.

The Japanese Yen (JPY) saw some weakness against the dollar hitting stops above 90.30 before risk aversion and weak US consumer confidence settled the pair near the key Y90 level at the close. Crosses were weak on the Chinese news but were able to recover most of these losses as bargain hunters emerged. Overall the USDJPY traded with a low of 89.60 and a high of 90.43 before closing the day around 90.00 in the New York session. Looking ahead, Q4 GDP is forecast at 3.7% vs. -12.7% y/y and 0.9% vs. -3.3% q/q.

The Sterling (GBP) rallied in early Europe on GBP/JPY buying to break above 1.5720 before being sold aggressively on the Chinese Ratio hike news. The market was then able to stabilize and recover into the New York Close. Overall the GBP/USD traded with a low of 1.5582 and a high of 1.5741 before closing the day at 1.5670 in the New York session.

The Australian Dollar (AUD) was the worst hit from the Chinese news as the commodity country’s export sector success story is closely correlated with Chinese economic expansion. The Aussie tumbled over one cent on the news and took a lot of the shine off the recent rally. Overall the AUD/USD traded with a low of 0.8784 and a high of 0.8915 before closing the US session at 0.8975.

Oil &amp Gold (XAU) was very well supported on dips to finish above the $1090 level. Government debt worries continue to support alternative investments. Overall trading with a low of USD$1078 and high of USD$1097 before ending the New York session at USD$1094 an ounce. Oil fell heavily on the Chinese tightening news and lower than expected European Growth. Crude Oil was up -$1.98 ending the New York session at $73.30.

TECHNICAL COMMENTARY

Euro – 1.3610

Initial support at 1.3531 (May 19 low) followed by 1.3424 (May 18 low). Initial resistance is now located at 1.3801 (Feb 11 high) followed by 1.3839 (Feb 9 high)

Yen – 90.05

Initial support is located at 89.15 (Feb 8 low) followed by 88.83 (Feb 5 low). Initial resistance is now at 90.55 (0.382 of 93.77-88.56) followed by 91.08 (Feb 4 high).

Pound – 1.5670

Initial support at 1.5560 (Feb 11 low) followed by 1.5536 (Feb 8 low). Initial resistance is now at 1.5776 (Feb 5 high) followed by 1.5888 (0.382 of 1.6458-1.5536).

Australian Dollar – 0.8875

Initial support at 0.8750 (Feb 11 low) followed by the 0.8710 (Feb 10 low). Initial resistance is now at 0.8921 (Feb 2 high) followed by 0.8962 (Jan 29 high).

Gold – 1094

Initial support at 1071 (Feb 8 low) followed by 1061 (Feb 8 low). Initial resistance is now at 1097 (Feb 11 high) followed by 1103 (0.500 of 1161.80-1044.85).

Oil – 74.20

Initial support at 72.50 (Intraday Support) followed by 70.00 (Intraday Support). Initial resistance is now at 75.00 (Intraday Resistance) followed by 77.00 (Intraday Resistance).