Australian FOREX Daily Outlook 29/05/2009

Yen drops on Investor Optimism

CURRENCY TRADING SUMMARY – 29th May (00:30GMT)

U.S. Dollar Trading (USD) enjoyed another brief bounce in the Asian session as investor concerns about the GM bankruptcy and weak stocks weigh on sentiment. The main source of gains was against the Yen which came under heavy selling pressure as moody affirmed the US AAA Bond rating. US data was mixed with weekly jobless claims improving to 623 K but New Home Sales remaining weak at 0.352M vs. 0.36M forecast. Crude Oil finished up $1.63 to finish the day at $65.08 a barrel. In US share markets, the Nasdaq was up 20 points or 1.20% and the Dow Jones was up 103 points or 1.25%. Looking ahead, Q1 GDP is expected to be revised to -5.5% vs. -6.1%.

The Euro (EUR) rebounding sharply from the 1.300 level grinding higher in the US session. Talk in Europe about future ECB policy focused on whether the 1.0% rate is the floor. German Unemployment data beat expectations at 1K vs. 66K forecast. Overall the EUR/USD traded with a low of 1.3792 and a high of 1.3984 before closing at 1.3935. Looking ahead, April German Retail Sales are forecast at 0.0% vs. -1% previously. May EU Flash Inflation is forecast at 0.2% vs. 0.6% previously y/y.

The Japanese Yen (JPY) weakened considerably in the Asian session after the affirmation of the US AAA rating from Moody’s. The pair trading above 96 and didn’t stop until sellers above 97 put a cap on the rally. Crosses were also very buoyant on the back of US stocks and are all nearing year highs. A major source of Yen selling was that Japanese Investors were looking for higher yields outside of Japan. Overall the USDJPY traded with a low of 95.48 and a high of 97.25 before closing the day around 96.85 in the New York session. Looking ahead, April Industrial Output is forecast at 3.2% vs. 1.6% previously.

The Sterling (GBP) traded briefly above the 1.6000 level but ran into a wall of offers and pulled back. CBI distributive trades fell to -17 vs. -10 forecast. GBP/JPY was incredibly well supported traded at fresh year highs of 155 Yen. EUR/GBP gave up some of the gains seen yesterday. Overall the GBP/USD traded with a low of 1.5851 and a high of 1.6017 before closing the day at 1.5940 in the New York session. Looking ahead, Nationwide House Prices are forecast to fall -0.9% vs. -0.4% previously.

The Australian Dollar (AUD) dipped in Asia before being caught once again by investors searching for higher yields. The Australian Interest Rate of 3.0% is the highest of the majors. Strong commodities prices are also helping to keep the bullish mood running although fresh gains and a test of 0.8000 may require more than hope to achieve in the short term. Q1 Capex fell -8.9% vs. + 6% previously. Overall the AUD/USD traded with a low of 0.7756 and a high of 0.7871 before closing the US session at 0.7845.

Gold (XAU) rallied above $960 and is threatening to break higher after trading in a range for the past week. Direction will be set by the fate of the USD. Overall trading with a low of USD$944 and high of USD$965 before ending the New York session at USD$961 an ounce.

Euro – 1.3950

Initial support at 1.3728 (May 28 low) followed by 1.3531 (May 21 low). Initial resistance is now located at 1.4058 (Jan 2 high) followed by 1.4148 (Dec 31 high)

Yen – 96.75

Initial support is located at 95.24 (Mar 28 low) followed by 94.43 (Mar 25 low). Initial resistance is now at 97.84 (May 12 high) followed by 98.82 (May 11 high).

Pound – 1.5950

Initial support at 1.5757 (May 22 low) followed by 1.5576 (23.6% retrace 1.4398 to 1.5944). Initial resistance is now at 1.6085 (May 27 high) followed by 1.6198 (Nov 5 high).

Australian Dollar – 0.7850

Initial support at 0.7703 (May 26 low) followed by the 0.7630 (May 19 low). Initial resistance is now at 0.7929 (50% retracement of 0.9847-0.6012 decline) followed by 0.8097 (Sep 30 high).

Gold – 960

Initial support at 936 (May 21 low) followed by 925 (May 20 low). Initial resistance is now at 967 (Mar 20 high) followed by 978 (Feb 25 high).