Australian FOREX Daily Outlook 25/11/2008

Citigroup Bailout stirs another stock market rally

CURRENCY TRADING SUMMARY – 25th November 2008 (00:30GMT)

·U.S. Dollar Trading (USD) weakened broadly as the market enjoyed a second day of good stock markets gains. News that Citigroup would be receiving a US20bn capital injection sent that stock up 60%. The Govt. will also guarantee US306bn of property backed assets. In other news, October Existing Home sales fell -3.1% vs. 5.5% previous with 4.98 Mln units sold. The USD suffered as commodities surged and safe haven flows stalled. In U.S. share markets, the NASDAQ was up 87.67 points (6.33%) and the Dow Jones was up 396 points (4.93%). Crude Oil closed up $4.57 ending the New York session at $54.50 per barrel. Looking ahead, Q3 GDP expected at -0.5% vs. -0.3% previously. Also released CB Consumer confidence seen at 37.9 in November.

·The Euro (EUR) rallied all day shrugging off poor economic data as stocks surged around the world. The November IFO slumped to 77.6 vs. 81 forecast. September Industrial orders missed at -3.9% vs. -3% expected. Aggressive EUR/JPY buying helped to underpin the Euros move above resistance at 1.28. Overall the EUR/USD traded with a low of 1.2566 and a high of 1.2959 before closing the day at 1.2545 in the New York session. Looking ahead, September Industrial Orders are seen down -3% vs. -1.2% previously. Also released, Q3 German GDP expected at -0.5% and German Consumer Confidence expected at 1.5 vs. 1.9 previously.

·The Japanese Yen (JPY) was the weakest currency last night as traders risk appetite surged with stocks. Carry trades benefited with AUD/JPY and EUR/JPY outperforming gaining over 5% each. The Yen has been the biggest gainer in recent months so there is a lot of room to weaken if the market can recover. Overall the USDJPY traded with a low of 94.96 and a high of 97.42 before closing the day around 997.10 in the New York session.

·The Sterling (GBP) broke above 1.5000 as risk sentiment improved and the heavily battered pound received some buying interest. The gains were still less than the market in general and EUR/GBP continued to gain. Some focus on the UK Governments plan to stimulate the economy with the budget released yesterday. Overall the GDP/USD traded with a low of 1.4845 and a high of 1.5188 before closing the day at 1.5160 in the New York session.

·The Australian Dollar (AUD) surged for a second day after Citigroup news was digested through the markets. The Large rally in commodities lead by Oil helped to underpin the moves higher. Market is already looking to next months RBA meeting and speculating on the size of the rate cut coming. Overall the AUD/USD traded with a low of 0.6233 and a high of 0.6553 before closing the US session at 0.6520.

·Gold (XAU) broke and closed above $800 a barrel in a continuation of the breakout of the 700-760 range. Helping to underpin the move was USD weakness and Oil Strength. Overall trading with a low of USD$786 and high of USD$829 before ending the New York session at USD$815 an ounce.

·Euro – 1.2915

Initial support at 1.2563 (Nov 24 low) followed by 1.2425 (Nov 21 low). Initial resistance is now located at 1.2930 (Nov 10 low) at followed by 1.3116 (Nov 19 high)

·Yen – 96.85

Initial support is located at 94.94 (Nov 24 low) followed by 93.62 (Nov 20 low). Initial resistance is now at 97.02 (Nov 24 high) followed by 97.55 (Nov 17 high).

·Pound – 1.5145

Initial support at 1.4841 (Nov 24 low) followed by 1.4713 (Nov 20 low). Initial resistance is now at 1.5249 (Nov 19 high) followed by 1.5267 (October 24 key level).

·Australian Dollar – 0.6495

Initial support at 0.6232 (Nov 24 low) followed by the 0.6076 (Nov 20 low). Initial resistance is now at 0.6546 (50% retrace 0.7015 to 0.6076) followed by 0.6597 (Nov 17 high).

·Gold – 817

Initial support at 78 (Nov 24 low) followed by 743 (Nov 21 low). Initial resistance is now at 829 (Nov 24 high) followed by 856 (Oct 15).