Australian FOREX Daily Outlook 16/06/2008

US CPI points to inflation pressures, Dollar gains

CURRENCY TRADING SUMMARY – 16th June 2008 (00:30GMT)

·U.S. Dollar Trading (USD) firmed on Friday as inflation fears were confirmed by US CPI data for May coming in at 0.6% up from April’s 0.2%. Food and energy which tends to be quite a volatile monthly component are excluded from the Core CPI data which came in at forecasts of 0.2%. The Dollar gained slightly on these results but as they were widely expected the moves were muted and gains were pared by the Preliminary Michigan Consumer Confidence survey which continued to fall coming in at 56.7 in June. In the US share markets, the NASDAQ was up 50 points (2.0%) and the Dow Jones was up 165 points (1.37%). Crude Oil closed down $1.88 ending the New York session at $134.86 per barrel. Looking ahead we have the June Empire state business conditions index forecasted at -1.5, April TIC net long term transactions expected at $63 Billion and Fed Chairman Bernanke speaking.

·The Euro (EUR) hit multi week lows as the strong Dollar combined with the Irish ‘NO’ vote in the Lisbon Treaty weighed on the single currency. A recovery into the close of the US session was seen on lacking G8 USD rhetoric whilst European leaders calling for the Lisbon treaty to continue being ratified. Overall the EUR/USD traded with a low of 1.5303 and a high of 1.5484 before closing the day at 1.5380 in the New York session. Looking ahead, May’s Eurozone Core CPI is expected to rise to 1.8% from Aprils 1.6% year on year.

·The Japanese Yen (JPY) the USD/JPY traded through strong resistance at 108.10 and 108.30 as equities rebounded and CPI buoyed the USD. Bank of Japan decided to keep interest rates on hold and the BoJ monthly report kept economic outlook unchanged. The markets also focused on Governor Shirakawa lack of hawkish comments in at the BoJ Press conference. Overall the USDJPY traded with a low of 107.65 and a high of 108.43 before closing the day around 108.22 in the New York session.

·The Sterling (GBP) also traded to multi week lows on the greenbacks momentum. Failure to break 1.9400 though allowed the cable to rally back to the 1.9500 in the US session. Overall the GBP/USD traded with a low of 1.9410 and a high of 1.9512 before closing the day at 1.9480 in the New York session.

·The Australian Dollar (AUD) had a mixed day initially buoyed by relatively hawkish comments from RBA Governor Stevens and reclaimed the 0.9400 handle. U.S. Dollar strength in the European session combined with a drop in Gold forced the Aussie to lows of the day before a recovery into close US session on the back of strong AUD/JPY. Overall the AUD/USD traded with a low of .9335 and a high .9412 before closing the day at .9386.

·Gold (XAU) fell as direction continued to be set by Crude Oil and USD movements. Overall trading with a low of $860 and high of $873.95 ending the New York session at $872 an ounce.

TECHNICAL COMMENTARY

·Euro – 1.5375

Initial support at 1.5284 (May 8 low) followed by 1.5262 (March 6 low). Initial resistance is now located 1.5483 (Jun 13 High) at followed by 1.5587 (Jun 12 high).

·Yen – 108.30

Initial support is located at 106.8 (June 12 low) followed by 106.24 (Jun 10 low). Initial resistance is now at 108.61 (Feb 14 high) followed by 108.98 (Jan 14 high).

·Pound – 1.9470

Initial support at 1.9405 (May 12 low) followed by 1.9363 (May 14 low). Initial resistance is now at 1.9645 (Jun 12 high) followed by1.9683 (61.8% retracement of the 1.9801 to 1.9493 decline)

·Australian Dollar – 0.9380

Initial support at 0.9304 (50% retracement of the .8953 to 0.9655 advance) followed by 0.9291 (May 15 low). Initial resistance is now at 0.9527 (Jun 10 high) followed by 0.9648 (Jun 9 high).

·Gold – 872

Initial support at 857.65 (Jun 12 low) followed by 850 (Psychological Number). Initial resistance is now at 883 (June 11 high) followed by 895 (Jun 10 high).