Australian FOREX Daily Outlook 27/02/2009

UK moves to support large banks

CURRENCY TRADING SUMMARY – 27th February 2009 (00:30GMT)

·U.S. Dollar Trading (USD) remained relatively unchanged against the majors with the market searching for direction. USD/JPY moves are creating a distortion in the market with risk aversion as a theme failing to impact as it once did. Weak/Strong US stocks are thus impacting the direction of EUR/USD and GBP/USD much less than usual with EUR/JPY and GBP/JPY failing to respond. Economic data overnight was weak with January Core Durable Goods Orders falling -5.2% vs. -2.5% forecast. Weekly Jobless also increased to 639K vs. 620k previously. Crude Oil closed up $2.72 ending the New York session at $45.22 per barrel. In US share markets, the Nasdaq was down -33 points or -2.38% whilst the Dow Jones fell -88 points or -1.22%. Looking ahead, Q4 GDP is forecast to be revised to -5.4% vs. -3.8%.

·The Euro (EUR) stayed range bound with EUR/JPY buying helping the major test 1.28 before settling lower. German Unemployment increased to 7.9% vs. 7.8% previously. Also released March German GFK Index increased to 2.6% vs. 2.2% previously. Overall the EUR/USD traded with a low of 1.2684 and a high of 1.2809 before closing the day at 1.2720. Looking ahead, January Eurozone Unemployment Rate forecast to rise to 8.1% vs. 8.0%. Also released, January CPI forecast at -0.9% vs. 0.4% previously.

·The Japanese Yen (JPY) weakened with the USD/JPY breaking above 98 and dragging all the crosses higher. Recent weakness is being attributed to weakening Japanese Economic fundamentals although there has been little complaint from Japanese exporters and the BOJ/MOF has been very quiet about the rapid FX move. Overall the USDJPY traded with a low of 97.34 and a high of 98.71 before closing the day around 98.30 in the New York session. UPDATE January Unemployment improves to 4.1% vs. 4.4% previously and Retail Sales drop to -2.4% vs. -2.7% previously.

·The Sterling (GBP) initially reacted negatively to news that the UK government would be increasing its stake in RBS to 84%. The large GBP/JPY rally help the pair rebound above 1.43. Nationwide House Prices fell -1.8% in February. Overall the GBP/USD traded with a low of 1.4164 and a high of 1.4383 before closing the day at 1.4320 in the New York session. UPDATE GFK Consumer Confidence improved to -35 vs. -39 forecast.

·The Australian Dollar (AUD) kept to the recent range with the market testing 0.6550 on the back of heavy AUD/JPY buying which broke above 64 Yen. Helping to keep sentiment positive was the better than expected Q4 Capex which increased 6% vs. -3% forecast. Overall the AUD/USD traded with a low of 0.6461 and a high of 0.6553 before closing the US session at 0.6500.

·Gold (XAU) tested supports at $933 which held firm and retraced to $947. The market has the downside in focus and will need a market event to reverse. Overall trading with a low of USD$932 and high of USD$956 before ending the New York session at USD$945 an ounce.

·Euro – 1.2735

Initial support at 1.2663 (Feb 24 low) followed by 1.2558 (Feb 20 low). Initial resistance is now located at 1.2997 (Feb 11 low) at followed by 1.3093 (Feb 9 high)

·Yen – 98.45

Initial support is located at 96.36 (Feb 25 low) followed by 94.63 (Feb 20 low). Initial resistance is now at 99.47 (Feb 25 high) followed by 99.92 (Nov 5 high).

·Pound – 1.4315

Initial support at 1.4052 (Feb 2 low) followed by 1.3929 (Jan 27 low). Initial resistance is now at 1.4607 (Feb 25 high) followed by 1.4662 (Feb 23 high).

·Australian Dollar – 0.6470

Initial support at 0.6333 (Feb 18 low) followed by the 0.6249 (Feb 2 low). Initial resistance is now at 0.6577 (Feb 16 high) followed by 0.6643 (Feb 13 high).

·Gold – 945

Initial support at 932 (Feb 13 low) followed by 911 (Feb 11 low). Initial resistance is now at 978 (Feb 25 high) followed by 995 (Feb 24 high).