Australian FOREX Weekly Outlook 02/06/2009

Last week’s currency trading review

The Dollar continued to be sold off in a broad based fashion after key levels on multiple currencies was breached. South Korean state pension fund exacerbated the negative mood stating that it was planning to reduce exposure to US treasuries. Also hurting was talk that the next BRIC meeting of the world’s biggest commodity bloc will consider de-dollarization as part of its agenda. Q1 GDP was revised lower to -5.7% vs. -6.1%. The Euro broke above 1.4000 and held the gains well into the weekend. Risk appetite and USD weakness the main catalyst in the move higher with EUR/JPY enjoyed good gains. German IFO improved to 84.2 vs. 83.7 previously and CPI came in flat 0.0% y/y in May. The EUR/USD gained 1.15% closing at 1.4159, after opening the week at 1.3996.

The Japanese Yen was even weaker than the USD as stock market gains helped encourage investors to sell the low yielding Yen. Jumps in Long term US interest rates help to keep the pair buoyant as did fresh gains on most of the crosses with GBP/JPY touching new year highs above 150 Yen. The USD/JPY gained 0.46% closing at 95.21 after opening at 94.77. The GBP continued higher against the dollar but also made fresh lows against the Euro as the riskier currency got more support during the week. A break of 0.8500 in the EUR/GBP could provide fresh selling towards 0.8000. GBP/USD gained 1.61% closing at 1.6188 after opening at 1.5927. The AUD broke above the key psychological level of 0.8000 as the pair received support form heavy AUD/JPY gains and commodity markets continued to surge. Q1 Capex fell -8.9% vs. -6.0% forecast. The AUD/USD closed up 2.31% at 0.8010 after opening at 0.7825.

The forex trading week preview

In the States big data week with Nonfarm Payrolls on Friday the Highlight. On Wednesday, ADP Unemployment Report forecast at -530K vs. -491k previously. Also on Wednesday, Non-manufacturing ISM forecast at 45 vs. 43.7 previously. On Friday, Non Farm Payrolls are forecast at -530K vs. -539K previously. Unemployment Rate is forecast at 9.2% vs. 8.9%. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Wednesday, EUGDP is forecast to unrevised at -2.5% in Q1. EU PPI is forecast at -0.8% m/m in April. On Thursday the ECB meet and are forecast to hold at 1.00% although the market will be listening to Trichet closely in the press conference afterwards. In the UK On Wednesday, PMI services are forecast at 49.4 vs. 48.7. On Thursday, BOE rate announcement widely expected to hold at 0.5%. Last meeting they did expand the QE program with negative implication for the GBP. We will provide our previews and reviews of these data releases in the daily summary.

In Japan Q1 Capex is forecast at -27.1% vs. -17.3% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Australia RBA meeting on Tuesday forecast to hold at 3.0% and Q1 GDP forecast at 0.2% vs. -0.5% previously. We will provide our previews and reviews of these data releases in the daily summary.

Euro – 1.4170

Initial support at 1.3926 (May 29 low) followed by 1.3793 (May 28 low). Initial resistance is now located at 1.4364 (Dec 29 high) followed by 1.4621 ()

Yen – 96.40

Initial support is located at 94.43 (Mar 25 low) followed by 93.52 (Mar 19 low). Initial resistance is now at 97.24 (May 28 high) followed by 98.82 (May 11 high).

Pound – 1.6455

Initial support at 1.5855 (May 28 low) followed by 1.5757 (May 22 low). Initial resistance is now at 1.6497 (June 1 high) followed by 1.6672 (Oct 30 high).

Australian Dollar – 0.8105

Initial support at 0.7803 (May 26 low) followed by the 0.7703 (May 29 low). Initial resistance is now at 0.8152 (76.4% retrace 0.8814 to 0.6009) followed by 0.8378 (Sep 26 high).

Gold – 976

Initial support at 959 (May 29 low) followed by 941 (May 26 low). Initial resistance is now at 1006 (Feb 20 high) followed by 1032 (Mar 17 high).