Australian FOREX Daily Outlook 19/02/2010

US FED hikes Discount rate to 0.75%

CURRENCY TRADING SUMMARY – 19th February (00:30GMT)

U.S. Dollar Trading (USD) was on the back foot as stock rallied in Europe and in the US before reversing after the New York close on an unexpected discount rate rise by the FED. The discount rate is the rate that the FED lends emergency liquidity to banks. This is positive for the Dollar as it is a step in the direction of raising the more important Fed funds rate. In US stocks DJIA +86 points closing at 10392, S&amp P +7 points closing at 1106 and NASDAQ +15 points closing at 2214. Looking ahead, January CPI is forecast at 0.3% vs. 0.1%.

The Euro (EUR) found some support in the stronger than expected US stock market after testing support at 1.3550. The Fed Rate move led to new 9 month lows as the pair tested support at 1.3500. EUR/JPY is well supported as the USD/JPY moves higher. Overall the EUR/USD traded with a low of 1.3442 and a high of 1.3657 before closing at 1.3510. looking ahead, February PMI manufacturing forecast at 52.6 vs. 52.4 previously.

The Japanese Yen (JPY) the USD/JPY uptrend helped most crosses to rally. The FED news had the effect of increasing US interest rate expectations and the USD/JPY is especially sensitive to this sort of information. The BOJ earlier in the day held rates at 0.1% and in the press conference again relayed their conviction in fighting inflation. Overall the USDJPY traded with a low of 90.56 and a high of 92.11 before closing the day around 91.90 in the New York session.

The Sterling (GBP) was sold in Europe on news that the UK public finances had unexpectedly increased by 4.3bn vs. -2.4bn forecast and in the current environment any bad news about government debt will be greatly scrutinized by the market. Overall the GBP/USD traded with a low of 1.5404 and a high of 1.5690 before closing the day at 1.5450 in the New York session. Looking ahead, January Retail sales are forecast at -0.5% vs. +0.3% previously m/m.

The Australian Dollar (AUD) was shunted lower by USD strength post rate hike but had been well supported on AUD/JPY buying earlier in the day. The US stock markets reaction to the news today will be critical for the AUD/USD direction over the short term with risk skewed to the downside. Overall the AUD/USD traded with a low of 0.8887 and a high of 0.9028 before closing the US session at 0.8920.

Oil &amp Gold (XAU) rallied off lows in Asia to touch $1025 in the US session before the Fed Rate hike sent the precious metal over $20 an ounce lower in late New York trade. Overall trading with a low of USD$1097 and high of USD$1124 before ending the New York session at USD$1105 an ounce. Continued to rally but gave up these gains after the closing bell. Crude Oil was down +$1.05 ending the New York session at $79.06.

TECHNICAL COMMENTARY

Euro – 1.3485

Initial support at 1.3425 (May 18 low) followed by 1.3400 (Big figure). Initial resistance is now located at 1.3788 (Feb 17 high) followed by 1.3839 (Feb 9 high)

Yen – 91.70

Initial support is located at 90.13 (Feb 17 low) followed by 89.72 (Feb 16 low). Initial resistance is now at 92.11 (Feb 18 high) followed by 93.2 (intraday resistance).

Pound – 1.5425

Initial support at 1.5400 (intraday support) followed by 1.5200 (intraday support). Initial resistance is now at 1.5500 (Intraday resistance high) followed by 1.5861 (Feb 1 low).

Australian Dollar – 0.8915

Initial support at 0.8849 (Feb 15 low) followed by the 0.8786 (Feb 12 low). Initial resistance is now at 0.9037 (Feb 17 high) followed by 0.9093 (Jan 25 high).

Gold – 1105

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 – 78.05

Initial support at 77.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 79.50 (Intraday Resistance) followed by 80.00 (Intraday Resistance).