Australian FOREX Daily Outlook 20/03/2009

USD loses further ground on plan to buy debt, whilst Commodities sore

CURRENCY TRADING SUMMARY – 20th March 2009 (00:30GMT)

·U.S. Dollar Trading (USD) continued to lose ground on majors in further reaction to the Federal Reserve plan to buy US long term bonds, and purchase of mortgage backed securities. The FOMC decision to instill quantitative easing has eroded the attraction to the USD as a proxy for safe haven. In other data US Jobless clams fell by 12K to 646K over the last week whilst the Philly Fed survey improved to 35 from its previous reading of 41.3 for the month of March, indicating a deceleration in contraction of the manufacturing industry. In other news the IMF cut its global growth forecasts with views that the world economy will contract between 0.5% and 1% throughout 2009. US share markets saw the NASDAQ down 7.74 pts (-0.52%) whilst the Dow Jones was also lower by 85.78 (-1.15%). Crude oil was a big gainer surging by more than 7% as commodity markets found new life from the US plan. Crude closed higher by $3.47 to close at $51.61 at the end of the New York session.

·The Euro (EUR) continued its buoyancy overnight trading above 1.3700 for the first time since January 2009 on bets the Federal Reserve’s plan to buy Treasuries will push down yields on U.S. assets and prompt investors to seek returns elsewhere. With the ECB’s reluctance to adopt a quantitative easing policy, flight to the single currency proved popular amongst investors. Overall the EURUSD traded with a low of 1.3419 and a high of 1.3737 before closing the day at 1.3670 in the New York session. Focus will shift to the EZ trade balance figures released on Friday with forecasts at -0.9 bln compared to the previous reading of -0.3 bln.

·The Japanese Yen (JPY) also rallied against the dollar in reaction to the FOMC plan to buy bonds, coupled with repatriation of funds by Japanese businesses ahead of the end of year (Fiscal) on March 31^st. Overall the USDJPY traded at low of 93.55 and a high of 96.61 before closing the day at 94.45.

·The Sterling (GBP) traded above 1.4500 supported by the Fed plan to purchase bonds. Although the rally was subdued (relative to other majors) with views that the BoE plan to instill there own quantitative easing last week may counteract that of the FOMC. Overall the GBPUSD traded at a low of 1.4162 and a high 1.4596 before closing the day at 1.4500 in the New York session.

·The Australian Dollar (AUD) was boosted further by commodity prices as well as the plan by US to buy bonds expected to further widen the differential in the yield between the two respective economies. The Australian dollar has also gained from the shift in sentiment and a return to risky assets. Overall the AUD traded with a low of 0.6721 and a high of 0.6943 before closing at 0.6858 at the end of the New York session.

·Gold (XAU) had its biggest jump in six months on revised concerns inflation will accelerate post Federal Reserves plan to buy debt. Gold soared $69.70 USD per ounce to close at 958.80 having traded at 961.50 earlier in the day.

·Euro – 1.3660

Initial support at 1.3417 (Mar 19 low) followed by 1.3329 (Former resistance Jan 27). Initial resistance is now located at 1.3752 (Jan 9 high) at followed by 1.3799 (Jan 8 high)

·Yen – 94.65

Initial support is located at 94.26 (Feb 24 low) followed by 93.41 (50% retracement 87.13 to 99.68). Initial resistance is now at 96.61 (Mar 19 high) followed by 98.97 (Mar 17 high).

·Pound – 1.4500

Initial support at 1.4160 (Mar 19 low) followed by 1.3844 (Mar 18 low). Initial resistance is now at 1.4555 (Mar 19 high) followed by 1.4663 (Topside Target).

·Australian Dollar – 0.6870

Initial support at 0.6724 (Mar 19 low) followed by the 0.6567 (Mar 17 low). Initial resistance is now at 0.6877 (Mar 19 high) followed by 0.7042 (Jan 12 high).

·Gold – 953.40

Initial support at 883.9 (Mar 18 low) followed by 874.80 (Jan 29 low). Initial resistance is now at 963.17 (Feb 27 high) followed by 978.27 (Feb 25 high).