Australian FOREX Daily Outlook 18/11/2009

EURO bows to resurgent USD

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

U.S. Dollar Trading (USD) took charge of the market with Bernanke’s comments being endorsed by ECB President Trichet to send the EURO lower and USD stronger across the board. Even as US stocks closed at year highs, risk was taken off the table as US data was weaker than expected. October Industrial Output was 0.1% vs. 0.4% forecast. In US Stocks, DJIA +30 points closing at 10437, S&amp P +1 points closing at 1110 and NASDAQ +6 points closing at 2203. Looking ahead, October Housing starts forecast at 0.6mn vs. 0.59mn previously and October Building Permits forecast at 0.58mn vs. 0.575mn previously. Also released, Weekly Oil Inventories is forecast at 1.2mn vs. 1.8mn previously. Also released, October Core CPI is forecast at 0.1% vs. 0.2% previously m/m.

The Euro (EUR) tested 1.5000 in early Asia before the mood soured and the pair fell back due to profit taking. This pullback turned in a rout in Europe with Trichet’s comments that Bernanke’s strong USD comments were ‘very important’. Overall the EUR/USD traded with a low of 1.4805 and a high of 1.5001 before closing at 1.4875. looking ahead, September Current Account previously at -1.3bn.

The Japanese Yen (JPY) weakened against the resurgent USD but was strong on the crosses as risk aversion from falling stocks saw AUD/JPY liquidation from recent highs. EUR/JPY and GBP/JPY are also treading water as the market trying to decipher the next direction. Overall the USDJPY traded with a low of 88.72 and a high of 89.56 before closing the day around 89.30 in the New York session.

The Sterling (GBP) was support on dips as EUR/GBP selling underpinned cable and buyers gained the upper hand. 1.7000 is the natural target for the bulls, last traded in August before the BoE started increasing the Asset Purchase program. October CPI was 1.5% vs. 1.4% y/y. Overall the GBP/USD traded with a low of 1.6753 and a high of 1.6876 before closing the day at 1.6820 in the New York session. Looking ahead, MPC minutes forecast at 9-0 on recent meeting decisions.

The Australian Dollar (AUD) was very heavy as the market took profit from lofty heights after the RBA minutes failed to inspire. The minutes left the decision to raise rates in December open with further data releases look set to decide. Providing continued support however is the commodity rally and already wide AUD-USD interest rate differential. Overall the AUD/USD traded with a low of 0.9310 and a high of 0.9379 before closing the US session at 0.9236.

Oil &amp Gold (XAU) dipped with USD strength but was bought back up quickly underpinning the support the precious metal is receiving. Overall trading with a low of USD$1127 and high of USD$1145 before ending the New York session at USD$1143 an ounce. Tracked Stocks and Metals higher. Crude Oil was up $0.24 ending the New York session at $79.14.

TECHNICAL COMMENTARY

Euro – 1.4875

Initial support at 1.4808 (Nov 17 low) followed by 1.4786 (0.618 of 1.4624-1.5049). Initial resistance is now located at 1.5016 (Nov 16 high) followed by 1.5048 (Nov 11 high)

Yen – 89.25

Initial support is located at 88.36 (Oct 9 low) followed by 88.00 (Big Figure). Initial resistance is now at 89.75 (Nov 16 high) followed by 90.60 (Nov 16 high).

Pound – 1.6820

Initial support at 1.6670 (Nov 16 low) followed by 1.6572 (Nov 13 low). Initial resistance is now at 1.6878 (Nov 16 high) followed by 1.7043 (Aug 5 high).

Australian Dollar – 0.9310

Initial support at 0.9211 (Nov 12 low) followed by the 0.9196 (Nov 9 low). Initial resistance is now at 0.9406 (Nov 16 high) followed by 0.9476 (Jul 31 ’08 high).

Gold – 1143

Initial support at 1118 (Nov 16 low) followed by 1101 (Nov 13 high). Initial resistance is now at 1144 (Nov 16 high) followed by 1150 (Big Level).

Oil – 79.50

Initial support at 78.00 (Intraday support) followed by 76 (Intraday support). Initial resistance is now at 80 (key level) followed by 82 (October high).