Australian FOREX Daily Outlook 22/05/2008

Better then expected German IFO survey sinks US Dollar, Commodities Surge

CURRENCY TRADING SUMMARY – 22nd MAY 2008 (00:30GMT)

·U.S. Dollar Trading (USD) The FOMC minutes out today from the April 29-30 meeting pointed to weakening growth and higher unemployment in the US economy for 2008. Also noted several policy makers considered it unlikely that further rate cuts would be appropriate for in upcoming meetings. The U.S share markets and USD reacted negatively to the downgraded outlook, NASDAQ down -43.99 points (-1.77%), DOW JONES down -227.49 points (1.77%), US dollar index at 72.34 down -.82%. Oil broke another record high gaining $4.19 to $133 per barrel on the weak USD and much lower then expected US crude oil inventories. Looking ahead, Initial Jobless Claims out today expected to come in at 373K.

·The Euro (EURO) received another boost on the back of better then expected German IFO business climate index coming in at 103.5 (102.1 expected). The EURUSD traded with a low of 1.5634 and a high of 1.5789 before closing the day at 1.5785 in the New York session. Looking ahead, European Industrial New Orders m/m out today expected to come in at -0.4%.

·The Japanese Yen (JPY) was aided today from sharp falls in equities around the world and generally weaker greenback. The USDJPY traded with a low of 102.99 and a high of 103.66 before closing the day around 103.05 in the New York session. Data out this morning included Japanese trade balance coming in at .61T vs .79 T expected.

·The Sterling (GBP) traded in a soggy tone after the MPC minutes came in as expected with members voting 8-1 for a hold in rates at 5.00% this month.Overall all the GBPUSD traded with a low of 1.9616 and a high of 1.9688 before closing the day at 1.9680 in the New York session. Looking ahead, Retail sales out today expected to come in at -0.5%.

·The Australian Dollar (AUD) touched 20 year highs overnight on surging commodities and continued fallout from hawkish RBA minutes. AUS/JPY traded as high as 99.80 but was weighed down by weak stocks. Overall the AUDUSD traded with a low of 0.9558 and a high of 0.9653 before closing the day at 0.9629 in the New York session. Looking ahead, very little data out for rest of weak.

·Gold (XAU) Gold rallied over $10 seen as an inflation hedge against surging Oil. Overall trading with a low of 916.95 and high of 932.55 ending the New York session at $932.

TECHNICAL COMMENTARY

·Euro – 1.5788

Initial support at 1.5631 (May 21 low) followed by 1.5504 (May 20 low). Initial resistance is now located at 1.5789 (May 21 high) followed by 1.5846 (76.4% retracement of 1.6019 to 1.5284).

·Yen – 102.90

Initial support is located at 102.58 (May 12 low) followed by 101.91 (May 12 low). Initial resistance is now at 103.69 (May 21 high) followed by key 104.48 (May 20 high).

·Pound – 1.9710

Initial support at 1.948 (May 20 low) followed by 1.9443 (May 16 low). Initial resistance is now at 1.9719 (May 20 high) followed by 1.9736 (May 7 high).

·Australian Dollar – 0.9632

Initial support a 0.9558 (May 21 low) followed by 0.9511 (May 19 low). Initial resistance is now at 0.9655 (May 21 trend high) followed by 0.9723 (open this week + range last week*0.618).

·Gold – 934

Initial support at 901 (May 19 low) followed by 880.5 (May 16 low). Initial resistance is now at 953 (Apr 17 reaction high) followed by 954.98 (March 26 reaction high).