Australian FOREX Daily Outlook 22/12/2009

Dollar Rally Continues

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

U.S. Dollar Trading (USD) the new dollar trend extended gains in quiet holiday trading. Not even a solid performance from US stocks could induce Dollar weakness in a dangerous sign for the bears still out there. Little Economic data was released and traders took their cue from a sharp drop in Gold Prices. DJIA +85 points closing at 10328, S&amp P +11 points closing at 1114 and NASDAQ +25 points closing at 2237. Looking ahead, Q3 GDP is forecast to be unrevised at 2.8% and November Existing Home Sales are forecast to increase to 6.25mln vs. 6.1mln previously.

The Euro (EUR) bounced around the 1.4300 level but was ultimately under pressure for most of the day and finished near multi-month lows. Some ECB members did little to help with Stark commenting he expects further European Bank Write downs and Orphanides comment that it was unthinkable that Greece would default. Overall the EUR/USD traded with a low of 1.4264 and a high of 1.4375 before closing at 1.4270. Looking ahead, October Industrial Orders forecast at -1.1% vs. 1.5% previously.

The Japanese Yen (JPY) was weak across the board as the improving risk appetite was expressed by Yen weakness rather than through the USD. USD/JPY broke above Y91 and EUR/JPY above Y130. The market is continued to focus on the difference in yields between US and Japan Government Bonds. Overall the USDJPY traded with a low of 90.22 and a high of 91.26 before closing the day around 91.20 in the New York session.

The Sterling (GBP) was under pressure for most the day losing ground against the Euro and GBP but was relatively unchanged against the Yen. The market is looking to the MPC minutes and any clarification of the Quantitative easing program. Overall the GBP/USD traded with a low of 1.6028 and a high of 1.6168 before closing the day at 1.6040 in the New York session. Looking ahead, Q3 GDP forecast at -0.1% vs. -0.3% initially.

The Australian Dollar (AUD) continued to be extremely weak as markets questioned the speed of Interest rate hikes over the last 3 months and going forward. Combined with a strong USD the market pushed the Aussie lower against all except the Yen. Overall the AUD/USD traded with a low of 0.8782 and a high of 0.8907 before closing the US session at 0.8810.

Oil &amp Gold (XAU) fell $20 as the market continued to pare back long gold positions. Overall trading with a low of USD$1089 and high of USD$1118 before ending the New York session at USD$1094 an ounce. Nigeria and Iraq pipeline bombs supported but failed to inspire fresh gains. Crude Oil was down -$0.89 ending the New York session at $73.60.

TECHNICAL COMMENTARY

Euro – 1.4275

Initial support at 1.4262 (Dec 18 low) followed by 1.4178 (Sept 1 low). Initial resistance is now located at 1.4412 (Dec 18 high) followed by 1.4536 (Dec 16 high)

Yen – 91.15

Initial support is located at 88.97 (Dec 18 low) followed by 88.58 (Dec 15 low). Initial resistance is now at 91.23 (Dec 21 high) followed by 91.32 (Nov 4 High).

Pound – 1.6040

Initial support at 1.6031 (Dec 21 low) followed by 1.5973 (Oct 15 low). Initial resistance is now at 1.6248 (Dec 18 high ) followed by 1.6341 (Dec 17 high).

Australian Dollar – 0.8785

Initial support at 0.8760 (Oct 6 low) followed by the 0.8647 (Oct 5 low). Initial resistance is now at 0.9011 (Dec 17 high) followed by 0.9070 (Dec 16 high).

Gold – 1094

Initial support at 1090 (Dec 21 low) followed by 1084 (Nov 5 low). Initial resistance is now at 1141 (Dec 17 high) followed by 1147 (Dec 9 high) .

Oil – 73.60

Initial support at 72.50 (Intraday support) followed by 70.00 (Intraday support). Initial resistance is now at 75.00 (Key Psychological Level) followed by 76.00 (Intraday resistance).