Australian FOREX Daily Outlook 19/03/2009

FOMC Printing Money USD Slumps

CURRENCY TRADING SUMMARY – 19th March 2009 (00:30GMT)

·U.S. Dollar Trading (USD) in a major market event the FOMC made the announcement that they would be buying $300bn in US Treasuries and $750bn mortgage backed securities. They maintained the Interest Rate at 0-0.25% whilst CPI (Feb) gained 0.4% as expected. The USD was crushed after the FOMC announcement dropping over 2% across the board. Crude Oil closed down $1.02 ending the New York session at $48.14 per barrel. In US share markets, the Nasdaq was up 29 points or 1.99% whilst the Dow Jones gained 90 points or 1.23%. Looking ahead, Weekly Jobless Claims are forecast at 650K vs. 654K previously. Philly Fed (March) forecast at -38 vs. -41.3.

·The Euro (EUR) was the biggest mover in the markets gaining over 3% after the key level 1.3080 was broken and the FOMC announced plans to Quantitative Ease. With stocks also rallying it was the perfect storm for the Euro outpacing other currencies. EUR/GBP was especially buoyant with resistance at 95 needed to halt the advance. Overall the EUR/USD traded with a low of 1.2988 and a high of 1.3534 before closing the day at 1.3480.

·The Japanese Yen (JPY) had a mixed day gaining heavily against the USD but losing ground against the Euro. USD/JPY slid to support around 95.70 before consolidating while the crosses grinded higher with EUR/JPY testing 130 in early Asia. The BOJ held rates at 0.1% but also announced a series of measures to help support the bond market. Overall the USDJPY traded with a low of 95.69 and a high of 98.80 before closing the day around 96.30 in the New York session.

·The Sterling (GBP) came under heavy selling pressure early in the European session breaking below 1.4000 as UK data continued to disappoint. February Claimant count change jumped to 134K vs. 84.5K. MPC minutes showed 9-0 vote to cut although concern about setting rates too low could mean further cuts are unlikely. The FOMC trumped all other considerations and Cable surged to 1.43. Overall the GBP/USD traded with a low of 1.3847 and a high of 1.4337 before closing the day at 1.4290 in the New York session. Looking ahead, March CBI Orders forecast at -55 vs. -56 previously.

·The Australian Dollar (AUD) consolidated around 0.6610 before the FOMC saw the 0.6650 resistance level breached and the Aussie soar to 0.6800. Gold rocketed and another stocks rallied underpinning the move higher although sustainable gains will require further market stabilization. Overall the AUD/USD traded with a low of 0.6568 and a high of 0.6815 before closing the US session at 0.6780.

·Gold (XAU) tested below $900 an ounce before the FOMC decision quickly sent the precious metal to above $940. Concerns that the new US Quantitative easing program will cause inflation in the long term underpinned the gains. Overall trading with a low of USD$883 and high of USD$949 before ending the New York session at USD$938 an ounce.

·Euro – 1.3485

Initial support at 1.3157 (Mar 18 low) followed by 1.2932 (Mar 17 low). Initial resistance is now located at 1.3500 (Key level) at followed by 1.4000 (Major Market level)

·Yen – 96.50

Initial support is located at 97.14 (Mar 13 low) followed by 95.67 (Mar 12 low). Initial resistance is now at 98.97 (Mar 17 high) followed by 99.19 (Mar 3 high).

·Pound – 1.4280

Initial support at 1.3844 (Mar 18 low) followed by 1.3703 (Mar 12 low). Initial resistance is now at 1.4300 (Key level) followed by 1.4500 (Topside Target).

·Australian Dollar – 0.6785

Initial support at 0.6513 (Mar 13 low) followed by the 0.6402 (Mar 11 low). Initial resistance is now at 0.6800 (Key Topside) followed by 0.6850 (Feb 9 high).

·Gold – 935

Initial support at 906 (Mar 12 low) followed by 889 (Mar 2 low). Initial resistance is now at 944 (Mar 6 high) followed by 958 (Mar 2 high).