Australian FOREX Daily Outlook 29/01/2008

US Housing slump remains, as bets added to 50 bps cut by Federal Reserve.

CURRENCY TRADING SUMMARY – 29 JANUARY 2008 (00:30GMT)

·U.S. Dollar Trading (USD) eased further against a number of majors as traders bet the Federal Reserve will look to cut interest rates by 50 bps later this week to prevent a US recession. On the data front, new-home sales fell to a 12-year low in December, coming in at 0.604 mln. In U.S. share markets the NASDAQ was up 150.91 points (+1.71%) whilst the Dow Jones also rebounded 176.72 points (+1.45%). Crude oil rose by US$0.36 a barrel to US$91.07. Looking ahead, key data on Tuesday will surround the December release of Durable Goods, with forecasts lying at 1.6% (Previous: -0.1%)

·The Euro (EUR) traded at a two week high versus the dollar as fears grew that the US was heading recession, and ongoing bets that the Fed will cut rates by as much as 50 bps on Wednesday. The EURUSD traded with a low of 1.4660 and a high of 1.4798 before closing the day at 1.4775 in the New York session.

·The Japanese Yen (JPY) weakened during the European session. The USDJPY traded with a low of 106.00 and a high of 107.04 before closing the day at 106.85 in the New York session. Data on Tuesday morning was sturdy out of Japan, with Household Spending coming in at 2.2% (Forecast: -0.2% Prior: -0.6%), Unemployment Rate 3.8% (Forecast: 3.9% Prior 3.8% and Retail Sales 0.2% (Forecast: 0.1% Prior: 1.6%)

·The Sterling (GBP) showed traders added to bets the Bank of England will lower its main rate from 5.5 percent at its Feb. 7 meeting to shore up the economy. U.K. house prices declined for a fourth month, an industry report showed today, and Bank of England policy maker David Blanchflower said the central bank should “get ahead of the curve”, the Guardian reported. The GBPUSD traded with a low of 1.9732 and a high of 1.9893 before closing the day at 1.9834 in the New York session.

·The Australian Dollar (AUD) continued its rally from last week breaking key levels throughout the day. The AUDUSD traded with a low of 0.8769 and a high of 0.8892 before closing the day at 0.8879 in the New York session.

·Gold (XAU) rose to a record $929.80 an ounce in New York as the dollar fell against the Euro, enhancing the metal’s appeal as an alternative investment. XAU traded with a low of 915.50 and a high of 929.20

TECHNICAL COMMENTARY

·Euro – 1.4780

Initial support at 1.4662 (Jan 28 low) followed by 1.4592 (Jan 24 low). Initial resistance is now located at 1.4799 (Jan 28 high) followed by 1.4859 (Jan 16 high).

·Yen – 106.95

Initial support is located at 104.97 (Jan 23 low) followed by 104.91 (May 11, 2005 low). Initial resistance is now at 107.89 (Jan 25 high) followed by 107.95 (Jan 16 high)

·Pound – 1.9855

Initial support at 1.9731 (Jan 28 low) followed by 1.9466 (Jan 23 low). Initial resistance is now at 1.9898 (Jan 2 high) followed by 2.0 (Round Number)

·Australian Dollar – 0.8880

Initial support a 0.8768 (Jan 28 low) followed by 0.8691 (Jan 24 low). Initial resistance is now at 0.9 (Round Number) followed by 0.9022 (Jan 15 high)

·Gold – 927.80

Initial support at 908.10 (Jan 23 low) followed by 876.80 (Jan 23 high). Initial resistance is now at 929.55 (Jan 28 high) followed by 950.0 (Psychological round number)