Australian FOREX Daily Outlook 20/03/2008

Profit taking enters markets. Gold drops the most in one day. USD rebounds

CURRENCY TRADING SUMMARY – 20 MARCH 2008 (00:30GMT)

·U.S. Dollar Trading (USD) rebounded sharply against the majors despite a sell-off in US equities. Reports of hedge funds actively trading commodities and currencies had an impact. Morgan Stanley posted earnings beating the street’s estimate by a sizeable margin, adding to the positive earnings releases from financial institutions thus far this week. The government relaxed capital requirements for the two largest Mortgage brokers Fannie Mae and Freddie Mac thus making available US$200billion of financing for home loans. In U.S. share markets the NASDAQ fell by 58 points (-2.6%) whilst the Dow Jones fell by 293 points (-2.4%). Crude oil pulled back by US$4.94 a barrel to end at US$104.48.

·The Euro (EURO) was slightly weaker amidst the rebound in USD against major currencies. Inflationary pressures cited by ECB officials continue to keep the Euro relatively well bid in the face of aggressive rate cuts in the US. Overall the EURUSD traded with a low of 1.5581 and a high of 1.5786 before closing the day at 1.5605 in the New York session. Looking ahead, PMI Manufacturing and PMI Services are due for release.

·The Japanese Yen (JPY) was somewhat weaker against the USD as the greenback rallied in the overnight session. Overall the USDJPY traded with a low of 97.68 and a high of 100.11 before closing the day at 98.89 in the New York session.

·The Sterling (GBP) was weaker against the US Dollar after the Bank of England minutes showed a 7-2 vote to keep rates on hold, with two dissenting voters opting for a rate cut. Britain’s largest mortgage lender HBOS Plc fell by 17% in London after fending off reports it had “liquidity problems.” Overall the GBPUSD traded with a low of 1.9800 and a high of 2.0152 before closing the day at 1.9819 in the New York session. Looking ahead, retail sales for the month of February are due out today.

·The Australian Dollar (AUD) was sold off against the greenback together with other major currencies. The AUD did not fare well also in light of the broad sell-off in commodities, particularly gold. Overall the AUDUSD traded with a low of 0.9120 and a high of 0.9354, before closing the day at 0.9127 in the New York session.

·Gold (XAU) plunged the most ever in one day as the markets booked recent profits. In 1980, XAU dropped by US$50/oz in 2 days from the high reached of US$873, a record which lasted for almost 28 years. Gold fell US$59 an ounce to US$945.30.

TECHNICAL COMMENTARY

·Euro – 1.5640

Initial support at 1.5613 (Mar 19 low) followed by 1.5523 (Mar 13 low). Initial resistance is now located at 1.5832 (Mar 18 high) followed by 1.5904 (Mar 17 trend high).

·Yen – 98.70

Initial support is located at 97.68 (Mar 19 low) followed by 96.86 (Mar 18 low). Initial resistance is now at 100.45 (Mar 19 high) followed by 101.16 (Mar 14 high)

·Pound – 1.9855

Initial support at 1.9875 (Former resistance Feb 27) followed by 1.9722 (Mar 5 low). Initial resistance is now at 2.0152 (Mar 19 high) followed by 2.0275 (Mar 18 high)

·Australian Dollar – 0.9135

Initial support a 0.9167 (Mar 18 low) followed by 0.9128 (Mar 17 low). Initial resistance is now at 0.9449 (Mar 17 high) followed by 0.9473 (Mar 13 high)

·Gold – 942

Initial support at 938.55 (Mar 19 low) followed by 900 (Psychological round number). Initial resistance is now at 1012.33 (Mar 18 high) followed by 1032.5 (Mar 17 high)