Australian FOREX Daily Outlook 18/02/2010

USD gains on Hawkish FED

CURRENCY TRADING SUMMARY – 18th February (00:30GMT)

U.S. Dollar Trading (USD) seized upon comments in the FOMC minutes that the FED should begin Asset Sales soon to drain some liquidity from the market. Some focus was again seen on Koenig’s dissent about the language of leaving rates low for an ‘extended period of time’. Economic data was also very strong with January Industrial Output at 0.9% vs. 0.7% forecast and January Housing Starts at 591k vs. 575k previously. In US stocks DJIA +40 points closing at 10309, S&amp P +4 points closing at 1099 and NASDAQ +12 points closing at 2226. Looking ahead, Weekly Jobless Claims are forecast at 430k vs. 440k previously.

The Euro (EUR) came under heavy selling pressure in Europe and in the US session as the relief rally stalled and the USD strengthened across the board. Concerns about Greece still linger and the Euro will struggle to maintain gains whilst this issue remains in focus. Overall the EUR/USD traded with a low of 1.3584 and a high of 1.3790 before closing at 1.3605.

The Japanese Yen (JPY) broke higher as the hawkish FED minutes led the USD/JPY to break past resistance at 90.50 and close above Y91. The mood is turning bullish on most crosses as well with improving risk appetite and stocks rallying throughout the globe. Overall the USDJPY traded with a low of 90.14 and a high of 91.41 before closing the day around 91.10 in the New York session. Looking ahead, BOJ Rate Decision forecast to remain at 0.1%

The Sterling (GBP) bowed down to USD strength but was also dented by some weak economic data as January Claimant count unexpectedly jumped +23.5k vs. -14.6k forecast. GBP/JPY well supported on Yen weakness and EUR/GBP fell back through 0.8700. Overall the GBP/USD traded with a low of 1.5664 and a high of 1.5819 before closing the day at 1.5680 in the New York session. Looking ahead, February CBI orders are forecast at -36 vs. -39 previously.

The Australian Dollar (AUD) held up better than most holding above 0.9000 until news of IMF selling gold on the open market sent the commodity pair back to 0.8970 supports. Risk appetite remains strong on the improving US data and stock-market action. Overall the AUD/USD traded with a low of 0.8963 and a high of 0.9039 before closing the US session at 0.9085.

Oil &amp Gold (XAU) profit taking turned into a sell off as the IMF announced plans to sell gold on the open market. Overall trading with a low of USD$1104 and high of USD$1128 before ending the New York session at USD$1108 an ounce. Crude Oil was little changed as improving economic outlook countered USD strength. Crude Oil was down +$0.36 ending the New York session at $77.37.

TECHNICAL COMMENTARY

Euro – 1.3605

Initial support at 1.3579 (Feb 15 low) followed by 1.3532 (Feb 12 low). Initial resistance is now located at 1.3801 (Feb 11 high) followed by 1.3839 (Feb 9 high)

Yen – 91.15

Initial support is located at 89.72 (Feb 16 low) followed by 89.57 (Feb 11 low). Initial resistance is now at 91.38 (Feb 17 high) followed by 91.88 (Jan 21 high).

Pound – 1.5680

Initial support at 1.5613 (Feb 15 low) followed by 1.5560 (Feb 11 low). Initial resistance is now at 1.5795 (Feb 16 high) followed by 1.5861 (Feb 1 low).

Australian Dollar – 0.8985

Initial support at 0.8849 (Feb 15 low) followed by the 0.8786 (Feb 12 low). Initial resistance is now at 0.9048 (Jan 28 high) followed by 0.9093 (Jan 25 high).

Gold – 1104

Initial support at 1098 (Feb 18 low) followed by 1078 (Feb 12 low). Initial resistance is now at 1127 (Feb 17 high) followed by 1141 (Jan 20 high).

Oil – 77.10

Initial support at 77.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).