Australian FOREX Weekly Outlook 27/10/2008

Yen Surge Causing Nikkei trouble

27/10/08

last week’s currency trading review

The Dollar gained heavily this week as key levels broke and risk aversion spiked higher especially on Friday as the Nikkei Plunged. Recession talks and forced selling from funds facing redemptions led to a very skittish market. Only the Yen gained against the dollar as carry trades were unwound heavily. The USD is being supported from collapsing emerging economies currencies. In US data unemployment claims rose to 478K from 470K previously. Also released Existing Home sales which jumped to 5.18M vs. 4.91M previously. The Euro broke below 1.3000 on suggestion that the Eurozone will cut rates aggressively and that the US is severely limited to the extent that it can cut rates. Also weighing was news of banking bailouts and disunity within the EU for the type of rescue package needed. The sentiment is very bearish right now and EUR/JPY dropped to its lowest ever rate as risk aversion reached capitulation level. On the Data front, German Flash manufacturing PMI was at 43.3 vs. 46.0 forecasts. The EUR/USD fell 6.3% closing at 1.2620, after opening the week at -6.24%. The Japanese Yen was the main gainer as USD/JPY broke below 100 and plummeted to 91. Extreme risk aversion and repatriation flows combined with carry trade unwind the major factors. The USD/JPY fell 7.8% closing at 94.28, after opening the week at 101.63. The GBP fell heavily with the Euro as USD strength and Risk aversion took its toll. Q3 GDP was recessionary at -0.5% vs. -0.2%. The GBP/USD fell 8.55% closing at 1.5917 after opening at 1.7217. The AUD fell the most of all currency as AUD/JPY hit critical levels and support gave way. The AUD/USD closed down 10.88% at 0.6211 after opening at 0.6887.

The forex trading week preview

In the States On Monday we have New Home Sales expected at 455K in September. ON Tuesday CB Consumer Confidence is expected to plummet to 52.2 vs. 59.8 in October. Durable goods are expected to fall -0.9% vs. -4.8% previously on Wednesday. On Wednesday we have the FOMC rate decision were the market is looking for a 0.50% cut to 1.00%. On Thursday we have Advance GDP expected to be -0.5% Q3. Finally on Friday University of Michigan expected at 49.1 vs. 56.7 previously. Also on Friday Fed Chief Bernanke speak. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Monday we have the German IFO business Climate is expected at 91.2 vs. 92.9 previously. On Tuesday GFK Consumer Climate is expected at 1.5 vs. 1.8 in November. On Wednesday we have Preliminary German CPI released for October expected at 2.4%. On Thursday we have German Unemployment Change expected at -10Kvs -29K previously. On Friday we have October European CPI expected at 3.3% vs. 3.6% previously. In the UK Light data week with September Mortgage Approvals seen at 33K vs. 32K on Wednesday. On Friday we have GFK consumer Confidence seen at -35 vs. -32 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan Tuesday we have September Retail Sales seen -0.2% vs. 0.7%. On Wednesday we have Sept Industrial Production expected at 0.4% vs. -3.5% previously. On Friday we have Interest rate announcement widely expected to remain at 0.5% and National CPI forecast at 2.3% vs. 2.4% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Australia very quiet week with no tier one data. Friday sees September Private sector credit expected to rise 0.4% vs. 0.5%. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.2585

Initial support at 1.2497 (Oct 24 low) followed by 1.2334 (April 24 2006). Initial resistance is now located at 1.3078 (Oct 22 high) at followed by 1.3359 (Oct 21 high).

·Yen – 93.20

Initial support is located at 90.93 (Oct 24 low) followed by 90.00 (Key level). Initial resistance is now at 98.32 (Oct 24 high) followed by 100.57 (Oct 22 high).

·Pound – 1.5805

Initial support at 1.5269 (Oct 24 low) followed by 1.5000 (Key level). Initial resistance is now at 1.6327 (Oct 24 high) followed by 1.7198 (Oct 21 high).

·Australian Dollar – 0.6165

Initial support at 0.6057 (Oct 24 low) followed by the 0.5929 (April 07 2003 low). Initial resistance is now at 0.7076 (Oct 15 high) followed by 0.7239 (Oct 14 high).

·Gold – 736

Initial support at 671.49 (Sept 04 2007 low) followed by 600 (Key Level). Initial resistance is now at 745.15 (Oct 24 high) followed by 750 (Key Level).