Australian FOREX Daily Outlook 21/01/2010

Stocks Stumble, Dollar Gains

CURRENCY TRADING SUMMARY –21st January (00:30GMT)

U.S. Dollar Trading (USD) accelerated recent gains as US stocks came under heavy selling pressure and the Euro plunged to 20 week lows. Data was mixed with December Housing starts at 557K vs. 580k expected while Building Permits were at 653k vs. 590k forecast. DJIA -122 points closing at 10603, S&amp P -12 points closing at 1138 and NASDAQ -29 points closing at 2291. Looking ahead, Weekly Jobless Claims are forecast at 440k vs. 444k previously. Also released, Weekly Crude Oil Inventories forecast at 2.2m vs. 3.7m previously.

The Euro (EUR) broke through 1.4250 in early Asia and the rout continued in Europe with markets turning aggressively bearish on the single currency. Momentum to the downside is accelerating and the major 1.4000 level is on the radar. December German PPI -0.1% vs. 0.2% forecast. Overall the EUR/USD traded with a low of 1.4079 and a high of 1.4291 before closing at 1.4110. Looking ahead, January PMI services forecast at 53.9 vs. 53.6 previously. January PMI manufacturing forecast at 51.8 vs. 51.6.

The Japanese Yen (JPY) was very strong on the crosses as risk aversion spiked higher and EUR/JPY dragged down the rest of the market. USD/JPY remained buoyant however as the Dollar was very strong. AUD/JPY traded at 2 week lows as traders unwound more positions from the recent rally. Overall the USDJPY traded with a low of 90.78 and a high of 91.48 before closing the day around 91.25 in the New York session.

The Sterling (GBP) good economic data helped the GBP continue to outperform the rest of the risk trades. December Claimant Count dropped -15k vs. -3k forecast and the Unemployment Rate dropped to 7.8% vs. 8.0% forecast. EUR/GBP pounced on the Euro weakness to trade at fresh 5 month lows below 0.8700. Overall the GBP/USD traded with a low of 1.6242 and a high of 1.6373 before closing the day at 1.6280 in the New York session. Looking ahead, January CBI Orders forecast at -37 vs. -42.

The Australian Dollar (AUD) was hit hard in Asia as the Euro crumbled and rumors circulated that china was curbing lending by the nations banks. The slide continued in the US session as stock losses mounted and gold crashed. January Consumer Sentiment soared 5.6% m/m. Sentiment is still strong towards the AUD but markets will be looking for the dust to settle before reestablishing longs positions. Overall the AUD/USD traded with a low of 0.9071 and a high of 0.9241 before closing the US session at 0.9100.

Oil &amp Gold (XAU) crashed through support at $1130 to test $1110. Overall trading with a low of USD$1107 and high of USD$1142 before ending the New York session at USD$1112 an ounce. Crude Oil slumped nearly $2 a barrel on risk reduction. Crude Oil was up -$1.72 ending the New York session at $77.30.

TECHNICAL COMMENTARY

Euro – 1.4110

Initial support at 1.4046 (Aug 17 low) followed by 1.4008 (Jul 29 low). Initial resistance is now located at 1.4296 (Jan 20 high) followed by 1.4414 (Jan 19 high)

Yen – 91.20

Initial support is located at 90.16 (Dec 21 low) followed by 89.30 (0.500 of 84.83-93.77). Initial resistance is now at 91.27 (Jan 19 high) followed by 91.32 (Jan 15 high).

Pound – 1.6290

Initial support at 1.6211 (Jan 15 low) followed by 1.6137 (Jan 13 low). Initial resistance is now at 1.6458 (Jan 19 high) followed by 1.6516 (Dec 7 high).

Australian Dollar – 0.9110

Initial support at 0.9073 (Jan 18 low) followed by the 0.9032 (0.500 of 0.8735-0.9328). Initial resistance is now at 0.9280 (Jan 18 high) followed by 0.9328 (Jan 14 high).

Gold – 1115

Initial support at 1107 (Jan 20 low) followed by 1095 (0.764 of 1074.88-1161.80). Initial resistance is now at 1146 (Jan 14 high) followed by 1161 (Jan 11 high).

Oil – 77.70

Initial support at 77.00 (Intraday support) followed by 75.00 (Intraday Support). Initial resistance is now at 78.00 (Intraday Resistance) followed by 80.00 (Intraday Resistance).