Australian FOREX Daily Outlook 29/07/2009

USD Bounces Back from the Brink

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

U.S. Dollar Trading (USD) the Dollar index bounced off a key level overnight at 78.30 last visited in May. The Failure of the Euro at 1.4300 and subsequent sell off dragged all the majors lower. Weak stocks and Oil also contributed. US data was strong again but the recent 10%+ equity rally is showing signs of stalling. Case Schiller House Prices in May were +0.5% vs. -0.6%. CB Consumer Confidence fell to 46.6 vs. 49.3 previously adding to the sour sentiment. Crude Oil ended down $1.15 higher to close at $68.38. In US share markets, S&amp P ended -2.56 points (-0.26%) at 979.62, NASDAQ ended +7.62 points (+0.39%) at 1975.51 and DOW JONES ended -11.79 points (-0.13%) at 9096. Looking ahead, June Durable Goods Orders forecast at -0.6% vs. 1.8% previously.

The Euro (EUR) retested 1.4300 and failed for the second day encouraging heavy profit taking. EUR/JPY dropped 2 yen after failing at the 136 Yen level adding to the downside pressure. Weak Oil also fueled the bears. The technicals are very mixed and choppy action is expected. Overall the EUR/USD traded with a low of 1.4130 and a high of 1.4306 before closing at 1.4160.

The Japanese Yen (JPY) USD weakness in Europe let the USD/JPY fall below 95 and the market reacted by testing 94 before finding and bouncing with a late relief rally in US stocks. EUR/JPY and AUD/JPY profit taking helped make the Yen strong. Overall the USDJPY traded with a low of 94.02 and a high of 95.20 before closing the day around 94.50 in the New York session. Looking ahead, Japan Industrial Output is forecast at 2.4% in June vs. 5.7% previously. UPDATE JULY RETAIL SALES -3% vs. -2.8%.

The Sterling (GBP) rallied with the Euro early in Europe but when the wheels fell off the pair crashed back to 1.6400. July CBI distributive Trades at -15 vs. -12 forecast. The market volatility in the pound is making it hard to break the recent range as risk appetite fights with poor fundamentals. Overall the GBP/USD traded with a low of 1.6389 and a high of 1.6559 before closing the day at 1.6455 in the New York session. Looking ahead, June Consumer credit forecast at 0.3% and Mortgage approvals up at 47k vs. 43k previously.

The Australian Dollar (AUD) broke year highs and set the Asia session on fire with RBA Governor Stevens widely seen to have shifted to a neutral stance from dovish and talk of the rate hikes coming before unemployment hits its peak in a speech given in Sydney. AUD/JPY surged and the AUD only grudgingly fell with the rest of the market in the US session. Overall the AUD/USD traded with a low of 0.8199 and a high of 0.8341 before closing the US session at 0.8240.

Gold (XAU) broke out the range to the downside tracking Oil lower. Overall trading with a low of USD$933 and high of USD$957 before ending the New York session at USD$938 an ounce.

TECHNICAL COMMENTARY

Euro – 1.4170

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 – 94.40

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 – 1.6410

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 – 0.8255

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 – 938

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).