Australian FOREX Daily Outlook 18/04/2008

U.S dollar regains some strength, not before reaching record lows. Sterling surges on back of BoE liquidity plan.

CURRENCY TRADING SUMMARY – 18 APRIL 2008 (00:30GMT)

·U.S. Dollar Trading (USD) was again volatile on Thursday as it reached a new record low against the Euro before pairing back following Luxembourg Finance Minister Juncker’s comments suggesting financial markets have misunderstood the G7’s position on currency volatility, hinting that the major concern is perhaps not in U.S weakness, rather in Euro strength. He went to say the Euro’s recent advance against the dollar is not “desirable.” This triggered a knee-jerk reaction to buy back the dollar. U.S initial jobless claims rose by 17k to 372k, however this was slightly less than forecast. The four-week average of new jobless claims remained largely unchanged at 376k. The Federal Reserve Bank of Philadelphia’s general economic index fell to -24.9 for the month of April after it was forecast to come in at -15, weakening demand and increased input prices were the blame for the poor result. In share market news, the NASDAQ fell 8 points (-0.4%), whilst the Dow Jones rose 125 points (1%). Oil prices reached new record highs of US$115.54, before weakening slightly as investors bought back the USD, ending the day’s trade down US7c a barrel to US$114.86. Looking ahead, The Fed’s Yellen, Fisher, Lacker and Rosengren will be speaking on Friday to shed more light on the path the U.S economy may take during coming months.

·The Euro (EURO) reached new record highs of 1.5985 on Thursday, but the psychological 1.60 barrier could not be broken as the Euro was sold off following officials from the ECB indicating the Euro’s current level is undesirable. The Euro Zone’s Trade Balance for the month of February came in at $800 million, up from -$11 billion in January. The EURUSD traded at a low of 1.5760 and a high of 1.5985, before closing at 1.5889 in New York. Looking ahead, the Euro’s largest economy, Germany, is to disclose PPI Core Output for the month of March with expectations of a growth in y/y figures from 3.8% to 4.0%.

·The Japanese Yen (JPY) weakened against the dollar as rallies in U.S, European and Asian equity markets prompted investors to take on carry trades through currencies such as the kiwi and Aussie dollar. The USDJPY traded at a high of 102.71 and a low of 101.71, before closing at 102.47 in New York.

·The Sterling (GBP) surged against the major currencies on Thursday as speculation the BoE next week will announce a plan to allow banks to swap mortgages for Government bonds for periods of 1-3 years to increase liquidity. This news encouraged investors to sell the greenback and look towards to the higher yielding pound. The pound also made gains on the Euro as Neil Mellor, a currency strategist at the Bank of New Mellon in London suggested this gain was “on the back of Euro-selling against the dollar following Juncker’s comments.” The GBPUSD traded at a low of 1.9693 and a high of 1.9924, before closing at 1.9909 in New York.

·The Australian Dollar (AUD) was reasonably range bound on Thursday as the greenback strengthened. The Aussie was well supported through its dips, as investors appetites for carry trades is still strong, leaving it poised to push through the 94c barrier should first quarter export and import prices to be released on Friday return favourable results. The AUDUSD traded at a high of 0.9392 and a low of 0.9340, before closing at 0.9356 in New York.

·Gold (XAU) prices fell on Thursday as the dollar rebounded against the Euro. However, these losses were capped as the strength of oil kept Gold at reasonable levels. XAUUSD fell US$5.40 an ounce to US$942.90.

TECHNICAL COMMENTARY

·Euro – 1.5910

Initial support at 1.5847 (Apr 17 low) followed by 1.5752 (Apr 15 Low). Initial resistance is now located at 1.5985 (Apr 17 trend high) followed by 1.6022 (Open this week + range last week).

·Yen – 102.45

Initial support is located at 101.71 (Apr 17 low) followed by 100.83 (Apr 16 low). Initial resistance is now at 102.72 (Apr 17 high) followed by 102.95 (Apr 3 reaction high).

·Pound – 1.9910

Initial support at 1.9692 (Apr 17 low) followed by 1.9600 (Apr 16 low). Initial resistance is now at 1.9924 (Apr 17 high) followed by 1.9928 (Apr 7 high).

·Australian Dollar – 0.9375

Initial support a 0.9250 (Apr 16 low) followed by 0.9206 (Apr 14 low). Initial resistance is now at 0.9403 (Apr 16 high) followed by 0.9473 (Mar 13 high).

·Gold – 942.00

Initial support at 937.60 (Apr 17 low) followed by 924.70 (Apr 16 low). Initial resistance is now at 953.00 (Apr 17 high) followed by 954.98 (Mar 26 high).