Australian FOREX Weekly Outlook 20/10/2008

Interbank Lending Rates fall for the First Week in Months

20/10/08

last week’s currency trading review

The Dollar was largely unchanged as the market recovered from the extreme volatility seen the week before. A massive relief rally for equities on Monday was offset by an equally large drop on Wednesday after US Retail Sales disappointed at -1.2% vs. -0.6% expected in September. A partial recovery into the weekend left the USD off highs but still well supported as commodities continued to be sold on Global recession fears. Oil traded under $70 per barrel for the first time this year. The Euro was unchanged against the USD but lost ground against the GBP as risk sentiment recovered slightly. On the data front Inflation started to slow at 3.6%. The October Zew Survey of Economic Sentiment deteriorated to -63. The EUR/USD was flat closing at 1.3409 after opening at 1.3410. The Japanese Yen lost ground across the board as the panic subsided and bargain hunters swooped on the USD/JPY below 100. The Bank of Japan left rates at 0.5% in an unscheduled meeting but did create measure to help liquidity in the Japanese Government Bond Market. The USD/JPY gained 0.96% closing at 101.63 after opening the week at 100.65. The GBP did manage to gain a small amount as it continued its bounce off the 1.70 level. The UK Government injected $9 billion into there banking system to sure up tier one capital levels. September CPI was higher than expected at 5.2% Y/Y. Also released Unemployment rate rose to 5.7% vs. 5.5%. The GBP/USD gained 1.33% closing at 1.7277 after opening at 1.7047. The AUD gained the most as the high yielding currency was the worst hit during the market turmoil. The Australian Government agreed to guarantee all deposits with financial institutions for the next three years. Also announced a $10billion stimulus package to help the economy. The AUD/USD closed up 6.62% at 0.6884 after opening at 0.6428.

The forex trading week preview

In the States Focus will be on FedSpeak this week with multiple members speaking. On Monday we have Bernanke Testifying at the House Budget Committee on Economy. Also speaking is Fed Member Lockhart. On Tuesday Fed Member Stern Speaks. ON Wednesday Weekly Jobless claims are seen at 470K vs. 461K last week. Also released the August House price index expected at -0.5%. On Friday we have September Existing Home Sales. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Monday we have German PPI expected at -0.5% vs. -0.6%. On Thursday the Eurozone Current Account expected at -5.0B vs. 1.7B previously. Also Aug New Industrial Orders seen at 0.3%. Finally On Friday we have Flash October PMI’s with the Eurozone, Services seen at 47 vs. 48.4 and manufacturing at 44.0 vs. 45.0 previously In the UK On Tuesday we have the Bank of England Governor King speaking. On Wednesday BoE Minutes expected at 9-0 for the cut 50Bps. On Thursday we have September Retail Sales expected at-0.6% vs. +1.2% previously. On Friday we finish with the Q3 advance GDP expected at 0.0% vs. -0.2% previously.We will provide our previews and reviews of these data releases in the daily summary.

In Japan Very Light Data week with Wednesday we have the August All-industry Activity Index seen at -1.7% vs. 0.8%. We will provide our previews and reviews of these data releases in the daily summary.

In Australia On Monday we have the Q3 PPI expected at 0.9%. On Tuesday we have the RBA minutes from the October Meeting and RBA Governor Speaks. On Wednesday we have Q3 CPI expected at 1.5% Q/Q. New Zealand Interest Rates are expected to be cut 1.0% to 6.5% in Friday. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.3405

Initial support at 1.3347 (Oct 16 low) followed by 1.3260 (Oct 13 trend low). Initial resistance is now located at 1.3538 (Oct 16 high) at followed by 1.3690 (Oct 9 high).

·Yen – 101.50

Initial support is located at 99.27 (Oct 16 low) followed by 97.91 (Oct 10 trend low). Initial resistance is now at 102.16 (Oct 15 high) followed by 103.07 (Oct 14 high).

·Pound – 1.7300

Initial support at 1.7136 (Oct 16 low) followed by 1.7106 (61.8% retrace 1.6781-1.7631). Initial resistance is now at 1.7384 (Oct 17 high) followed by 1.7631 (Oct 14 high).

·Australian Dollar – 0.6900

Initial support at 0.6731 (Oct 17 low) followed by the 0.6496 (Oct 16 low). Initial resistance is now at 0.6985 (Oct 17 high) followed by 0.7076 (Oct 15 high).

·Gold – 785

Initial support at 774.40 (Sept 17 low) followed by 764.6 (Sept 15 low). Initial resistance is now at 850 (Oct 16 high) followed by 856.46 (Oct 15 high).