Australian FOREX Weekly Outlook 15/12/2008

USD weakens into Year’s end

15/12/08

last week’s currency trading review

The Dollar experienced a shift of sentiment as repatriation demand dried up and key technical levels were broken on multiple pairs. General buoyancy in the Equities markets saw safe haven flows decrease but even in moments of heightened concern the USD didn’t gain like previous months raising fears it status as a safe haven was under threat. On the data front Pending home sales fell -0.7% in October vs. -3.2% forecast. The Trade balance deficit widened to -57.2Bn vs. -56.6Bn previously. US Retail Sales fell -1.8% vs. -2.9% previously. US PPI fell -2.2% in November vs. -2.0% forecast. The Euro was extremely well supported taking full advantage of the change in sentiment breaking through key resistances on the topside. The German Zew survey improved to -45.2 vs. -55.7 expected as lower Oil and interest rate cuts improved business sentiment. ECB members warned that the rate cycle might be nearing the bottom. The EUR/USD gained 4.84% closing at 1.3368, after opening the week at 1.2721. The Japanese Yen continued to make solid gains against the USD as it was broadly sold off. Most crosses did gain on the week though as equities were generally bid. News that the US senate would not provide a bailout to the Automakers sent risk aversion rocketing higher and this allowed the USD/JPY to fall below the strong support at 90, crashing to 88.20 before recovering on news the White House may step in to bail the auto industry out. GDP was revised down to -0.5% in Q3 from -0.1% initially reported. The USD/JPY fell 1.92% closing at 91.12 after opening at 92.87. The GBP did make gains on the week but underperformed most currencies with year lows in the GBP/JPY and record highs in the EUR/GBP weighing on the markets. PPI fell 3.3% in November and Manufacturing Production dropped to -1.4% vs. -0.6% previous. The GBP/USD gained 1.76% closing at 1.4950 after opening at 1.4687. The AUD gained steadily as Oil and Gold raced higher and the market took on more risk as stocks rose. Australian Unemployment showed a drop of -15.6K in November with the Unemployment rate rising to 4.4%. The AUD/USD closed up 1.76% at 0.6640 after opening at 0.6447.

The forex trading week preview

In the States On Monday Industrial Production is expected to show a -0.8% fall in November with the Capacity Utilization seen dropping to 75.7% vs. 76.4% previously. On Tuesday the market is keen to see if November CPI follows the PPI lower with expectations of a -1.2% fall. Also on Tuesday we have the FOMC rate announcement with the market seeing a 0.5% rate cut to 0.5% from 1.0% previously. On Thursday Weekly Jobless claims are seen at 558K vs. 573K previously and the Philly Fed Index is seen dropping to -40 in December from -39.3 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone ECB Trichet speaks on Monday. On Tuesday Eurozone December PMI’s are released with services seen at 43.8 vs. 45.1 previously and Manufacturing forecasted at 34.5 vs. 35.6. On Wednesday Eurozone CPI is expected to fall to 2.1% vs. 3.2% previously. On Thursday the German IFO is expected to fall to 84 in December vs. 85.8 previously. In the UK On Tuesday Novemebr CPI is expected as 3.9% vs. 4.5% previously. On Wednesday the Bank of England minutes are seen at 9-0 and the ILO Unemployment Rate is expected to rise to 6.0% vs. 5.8% previously. Jobless Claims are seen rising 45K vs. 36.5K previously. On Thursday November Retail Sales are seen falling -0.4% vs. -0.1% previously. Finally on Friday we have Dec GFK Consumer Confidence expected to fall to -39 vs. -35 in November. We will provide our previews and reviews of these data releases in the daily summary.

In Japan The Q4 Japanese Tankan Survey is expected to deteriorate to -23 vs. -3 previously. On Thursday the October Activity Index is expected to fall -0.8% vs. -0.10% previously. On Friday the BoJ meet to discuss rates and are widely expected to hold at 0.30%. We will provide our previews and reviews of these data releases in the daily summary.

In Australia Very light data week with the RBA minutes on Tuesday the highlight from the December meeting. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.3390

Initial support at 1.300 (Dec 11 low) followed by 1.2903 (Dec 10 low). Initial resistance is now located at 1.3415 (Dec 12 high) at followed by 1.3530 (Oct 20 high)

·Yen – 90.90

Initial support is located at 88.20 (Dec 12 low) followed by 88.07 (Range Projection). Initial resistance is now at 91.86 (Dec 12 high) followed by 92.88 (Dec 11 high).

·Pound – 1.4960

Initial support at 1.4816 (Dec 12 low) followed by 1.4736 (Dec 10 low). Initial resistance is now at 1.5118 (Dec 12 high) followed by 1.5213 (Nov 26 high).

·Australian Dollar – 0.6620

Initial support at 0.6490 (Dec 12 low) followed by the 0.6453 (Dec 8 low). Initial resistance is now at 0.6733 (Dec 12 high) followed by 0.68041 (Dec 11 high).

·Gold – 822

Initial support at 774 (Dec 10 low) followed by 763 (Dec 9 low). Initial resistance is now at 835 (Dec 11 high) followed by 856 (Oct 15 high).