Australian FOREX Daily Outlook 15/12/2008

US Senate Blocks Auto Bailout shocks Market

CURRENCY TRADING SUMMARY – 15th December 2008 (00:30GMT)

·U.S. Dollar Trading (USD) came under continued pressure as reports circulated in Asia that the US senate was not going to pass the Auto bailout. Asia stocks slumped on the news and the weakening USD led to talks it was losing its safe haven status. Talks from the White House that TARP money may be used to support the Automakers stabilized the market somewhat and better than expected Retail Sales let the market finish higher. November US Retail Sales fell 1.8% vs. -2% forecast. Also released November PPI falling -2.2% vs. -2.0% expected as steep falls in Oil continued to filter through the real economy. In U.S. share markets, the NASDAQ was up 32 points (2.18%) and the Dow Jones was up points 65 (0.75%). Crude Oil closed down $1.70 ending the New York session at $46.28 per barrel. Looking ahead, November Industrial Output seen falling -0.9% vs. +1.3% previously.

·The Euro (EUR) remained well support all day even as risk aversion spiked higher after the US bailout news was announced. Good Gains against the EUR/GBP buoyed but heavy EUR.JPY selling put a short term cap on the rally. Analysts are mixed in there views of whether this latest move is a new trend higher or correction in the move lower. Eurozone Industrial Production dropped 1.2% in October. Overall the EUR/USD traded with a low of 1.3250 and a high of 1.34 before closing the day at 1.3340. Looking ahead, ECB President Trichet speaks today.

·The Japanese Yen (JPY) was extremely volatile as the USD/JPY hit 13 year lows below 90 as the Auto bailout news hurt Asian sentiment. The break below 90 saw large stops and corporate hedging orders going through quickly pushing the spot to lows of 88.20 before MOJ talks of FX intervention caused massive short covering and the market leapt back above 90. Overall the USDJPY traded with a low of 88.20 and a high of 91.85 before closing the day around 90.99 in the New York session. UPDATE Q4 TANKAN SURVEY -24 vs. -23 forecast.

·The Sterling (GBP) was buoyed by the large EURO gains but is finding it hard to maintain the 1.5000 level slipping below in Europe as heavy EUR/GBP buying and GBP/JPY selling dragged the pair lower. Overall the GDP/USD traded with a low of 1.4817 and a high of 1.5117 before closing the day at 1.4970 in the New York session.

·The Australian Dollar (AUD) fell back on profit taking before slipping further on the US bailout news. The US equities recovery allowed the pair to recover strongly although well off the highs of Thursday. AUD/JPY selling overwhelmed the AUD/USD which was getting support from higher commodities and weaker USD. Overall the AUD/USD traded with a low of 0.6490 and a high of 0.6733 before closing the US session at 0.6613.

·Gold (XAU) ended unchanged as USD weakness offset falls in Oil and Platinum. Overall trading with a low of USD$809 and high of USD$828 before ending the New York session at USD$821 an ounce.

·Euro – 1.3390

Initial support at 1.300 (Dec 11 low) followed by 1.2903 (Dec 10 low). Initial resistance is now located at 1.3415 (Dec 12 high) at followed by 1.3530 (Oct 20 high)

·Yen – 90.90

Initial support is located at 88.20 (Dec 12 low) followed by 88.07 (Range Projection). Initial resistance is now at 91.86 (Dec 12 high) followed by 92.88 (Dec 11 high).

·Pound – 1.4960

Initial support at 1.4816 (Dec 12 low) followed by 1.4736 (Dec 10 low). Initial resistance is now at 1.5118 (Dec 12 high) followed by 1.5213 (Nov 26 high).

·Australian Dollar – 0.6620

Initial support at 0.6490 (Dec 12 low) followed by the 0.6453 (Dec 8 low). Initial resistance is now at 0.6733 (Dec 12 high) followed by 0.68041 (Dec 11 high).

·Gold – 822

Initial support at 774 (Dec 10 low) followed by 763 (Dec 9 low). Initial resistance is now at 835 (Dec 11 high) followed by 856 (Oct 15 high).