Australian FOREX Weekly Outlook 26/05/2009

Last week’s currency trading review

The Dollar moved dramatically lower on concerns that the AAA debt rating for the US is not sustainable. The focus was initially on the UK economy when Moody’s put that rating on negative watch. The other major negative USD story was the FOMC minutes which showed expansion of the Fed Bond buying program was a possibility. US April housing starts dropped to 0.46M vs. 0.53M previously. The Euro surged towards the 1.4000 level as the market aggressively sold the USD giving the worlds second largest currency a major boost. German Zew Survey showed a nice rebound to 31 vs. 13 previously. May PMI surveys were all better than expected but still comfortably lower than 50 expansion mark. The EUR/USD gained 3.59% closing at 1.3997, after opening the week at 1.3494.

The Japanese Yen strengthened against the friendless USD but was still dramatically weaker against risk currencies who received large boosts from their respective majors. The BOJ held at 0.1% but did upgrade there economic view for the first time in 3 years. The USD/JPY fell -0.47% closing at 94.77 after opening at 95.22. The GBP was the largest gainer against the greenback as resistance at 1.55 gave way. EUR/GBP and GBP/AUD also experienced solid gains as the Pound outpaced. Retail Sales were +0.9% vs. 0.5% previously. GBP/USD gained 4.67% closing at 1.5921 after opening at 1.5177. The AUD surged above 0.7800 to fresh year highs. RBA minutes showed a month to month approach to rate decisions along with a lowering of growth outlooks. Of main concern was the deterioration of the terms of trade. The AUD/USD closed up 4.28% at 0.7825 after opening at 0.7490.

In the States in a short week due to Memorial Day Monday the highlight will be the revised Q1 GDP. On Tuesday May Consumer Confidence forecast at 43.0 vs. 39.2. On Wednesday, April New Home Sales are forecast at 4.66M vs. 4.57M previously. On Wednesday, Durable Goods Orders are forecast at 0.5% vs. -0.8%. On Thursday, weekly jobless claims are forecast at 630K vs. 631k previously. On Friday Q1 GDP is forecast at -5.5% vs. -6.1% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Tuesday German ZEW Economic Sentiment survey forecast at 20.0 vs. 13.0 previously. Also released, Q1 Final GDP is forecast to remain at -3.8% q/q. On Wednesday,German CPI is forecast at -.2% vs. 0.7% previously. On Thursday, the May German Unemployment rate is forecast at 8.4% vs. 8.3% previously. In the UK on Thursday we have GFK Consumer Confidence forecast at -25 vs. -27 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan On Thursday, Retail Sales are forecast at 0.5% vs. -1.1% previously. On Friday April Industrial Production is forecast at -32.5% y/y. We will provide our previews and reviews of these data releases in the daily summary.

In Australia Quiet week with Q1 Capex forecast at -5% on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro – 1.4020

Initial support at 1.3728 (May 21 low) followed by 1.3531 (May 19 low). Initial resistance is now located at 1.4058 (Jan 2 high) followed by 1.4148 (Dec 31 high)

Yen – 94.65

Initial support is located at 93.54 (Mar 19 low) followed by 92.52 (Mar 19 low). Initial resistance is now at 96.70 (May 19 high) followed by 97.84 (May 12 high).

Pound – 1.5920

Initial support at 1.5519 (May 21 low) followed by 1.5450 (May 21 low). Initial resistance is now at 1.6198 (Nov 5 high) followed by 1.6464 (Oct 31 high).

Australian Dollar – 0.7825

Initial support at 0.7630 (May 19 low) followed by the 0.7451 (May 18 low). Initial resistance is now at 0.7929 (50% retracement of 0.9847-0.6012 decline) followed by 0.8097 (Sep 30 high).

Gold – 957

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).