Australian FOREX Daily Outlook 28/07/2009

USD under pressure from risk taking

CURRENCY TRADING SUMMARY – 28th July (00:30GMT)

U.S. Dollar Trading (USD) was sold for most of Asia and Europe before a slide in US stocks at the open gave the USD a short term reprieve. The EURO and AUD were pressuring month highs threatening to break higher. New Home Sales surged +10% in June, encouraging dip buyers to help US stocks finish in the green once again. Crude Oil ended $0.33 higher to close at $68.38. In US share markets, S&amp P ended +2.92 points (+0.30%) at 982, NASDAQ ended +1 points (0.1%) at 1967 and DOW JONES ended +15.27 points (+0.17%) at 9108. Looking ahead, CB Consumer Confidence forecast at 49 vs. 49.3 previously. Also released, Case Schiller for May forecast at -0.5% vs. -0.6% previously.

The Euro (EUR) was bought heavily during Asia to set up a test of 1.4300 in Europe before falling quite sharply in the US after failing at the Key level. German GFK in August climbed to 3.5 vs. 2.9 forecast and help support the pair. EUR/GBP was volatile as traders tested both sides of the 0.86-87 range. EUR/JPY tested 136. Overall the EUR/USD traded with a low of 1.4171 and a high of 1.4300 before closing at 1.4240.

The Japanese Yen (JPY) was trading in an extremely tight range in Asia even as the Nikkei gained 2% before breaking higher above 95 Yen in Europe on heavy EUR/JPY and AUD/JPY buying. Further Gains were limited by USD weakness as the two safe haven currencies competed for the weakest footing. Overall the USDJPY traded with a low of 94.67 and a high of 95.41 before closing the day around 95.20 in the New York session. Looking ahead, Japanese Retail Sales for July forecast at -2.5% vs. -2.8% previously.

The Sterling (GBP) was volatile as risk taking helped the pair above 1.6500 before finding heavy selling above this level that discourage further buying especially as the Euro fell back from 1.4300. GBP/JPY provided plenty of support but the recent stock rally was questioned in the US and the pair could fall back if stocks retreat. Overall the GBP/USD traded with a low of 1.6380 and a high of 1.6526 before closing the day at 1.6480 in the New York session. Looking ahead, July CBI distributive Trades are forecast at -12 vs. -17 previously.

The Australian Dollar (AUD) tested year highs on the back of fresh highs in the Nikkei and strong AUD/JPY support. The failure of the EURO to breach its resistance and weak US stocks helped keep the key level intact but the market bullish bias will require a distinct shift to change direction. Overall the AUD/USD traded with a low of 0.8143 and a high of 0.8262 before closing the US session at 0.8220. Looking ahead, RBA Governor Stevens speaks.

Gold (XAU) tried to break higher but suffered the same fate as the majors falling back on profit taking. Overall trading with a low of USD$947 and high of USD$959 before ending the New York session at USD$954 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4245

Initial support at 1.4120 (Jul 23 low) followed by 1.4056 (Jul 16 low). Initial resistance is now located at 1.4338 (Jun 3 high) followed by 1.4719 (Dec 18 high)

Yen – 95.20

Initial support is located at 93.10 (Jul 22 low) followed by 92.72 (July 14 low). Initial resistance is now at 95.46 (Jul 7 high) followed by 96.24 (July 6 high).

Pound – 1.6495

Initial support at 1.6311 (July 22 low) followed by 1.6266 (Jul 13 low). Initial resistance is now at 1.6586 (Jun 23 high) followed by 1.6745 (June 30 high).

Australian Dollar – 0.8225

Initial support at 0.8090 (July 15 low) followed by the 0.7925 (July 14 low). Initial resistance is now at 0.8263 (June 3 high) followed by 0.8378 (Sept 26 high).

Gold – 953

Initial support at 932 (Jul 17 low) followed by 918 (July 14 low). Initial resistance is now at 965 (June 10 high) followed by 990 (Jun 3 high).