Australian FOREX Weekly Outlook 9/03/2009

Stocks Under pressure on Global Recession fears

09/03/09

last week’s currency trading review

The Dollar finished slightly stronger on the week as stock markets hit new 12 year lows and weak US data kept safe haven flows dominate. US February Nonfarm Payrolls dropped by 650K at expectations but the Unemployment rate increased to 8.1% vs. 7.9% forecast. ISM data was better than forecast with Manufacturing at 35.8 vs. 34.0F and Non Manufacturing at 41.6 vs. 41.2F. Dollar weakness was seen on the commodity front though with Oil rallying above $45 a barrel. The Euro ended slightly lower but was well behaved with market holding a 1.2450 to 1.2750 range. Weakness was seen on Thursday after the ECB cut Rates by 0.5% to 1.5% and Trichet left future rates cuts on the table. The EUR/USD fell -0.13% closing at 1.2649, after opening the week at 1.2666. The Japanese Yen continued on its uptrend but failed to take out the key 100 level and fell back heavily on profit taking during Fridays USD sell off. Stabilization under 97 Yen helped the pair to bounce into the US close. The USD/JPY gained 0.74% closing at 98.30 after opening at 97.57. The GBP came under plenty of pressure during the week with multiple negative news stories emerging. The 1.400 offered plenty of support however and the failure to break convincingly this level has left the cable with solid base. The BOE cut rates to 0.5% and revealed plans to initiate Quantitative Easing to the scale of 150 Bn Pounds iniatially. News of further nationalization of major UK banks also kept the market very volatile within a 1.44-1.40 range. The GBP/USD fell -1.57% closing at 1.4090 after opening at 1.4311. The AUD found solid support under .6300 and formed a double bottom there as the market shrugged off negative GDP data for Q4 2008. Expected at 0.2% the result of -0.5% surprised the market and put the pair under immense pressure until news of a second China Stimulus Plan help lift the pair back to 0.6500. Weak stocks capped any further gains although strong commodities kept the pair well supported. The AUD/USD closed up 0.25% at 0.6403 after opening at 0.6387.

The forex trading week preview

In the States light data week with Retail Sales for February due out on Thursday the highlight expected to be -0.5% vs. 1.0% previously. Also on Thursday Weekly Jobless claims seen at 640K vs. 639K previously. January Trade Balance on Friday is expected to show a -38Bn deficit vs. -39.9Bn previously. Finally on Friday, University of Michigan March Consumer Sentiment forecast at 55 vs. 56.3 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Tuesday, February German CPI is forecast at 1.0% vs. 0.9% previously Y/Y. On Wednesday German PPI is forecast at -0.1% m/m. On Thursday Eurozone PPI is forecast to fall -0.2% in January. On Thursday, we have January German Industrial Production forecast at -3.0% vs. -4.6% previously m/m. On Friday January Retail Sales are forecast at 0.2% vs. 0.0% previously m/m. In the UK On Tuesday January Industrial Production is forecast at -1.2% vs. -1.7%. Also released, January Manufacturing Production forecast at -1.4% vs. -2.2% previously. On Wednesday the January trade Balance is seen at -3.7Bn vs. -3.6Bn previously. On Thursday the BOE releases its Quarterly Inflation Attitudes Survey. We will provide our previews and reviews of these data releases in the daily summary.

In Japan on Monday January Current account is forecast to be negative for the first time in 13 years at -15.3 Bn vs. 125.4 Bn previously. On Tuesday January Machine Orders are forecast at -5.0% vs. -1.7% previously. On Wednesday Q4 Final GDP forecast to be revised lower to -3.5% vs. -3.3% initially. We will provide our previews and reviews of these data releases in the daily summary.

In Australia On Tuesday Business confidence is for February released previously at -32. On Thursday RNBZ is forecast to cut rates to 2.75% from 3.5%. Also on Thursday Australian Unemployment is forecast to increase to 5.0% in February vs. 4.8% previously. The Unemployment change is forecast at -21.2K vs. 1.2K previously. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.2680

Initial support at 1.2533 (Mar 6 low) followed by 1.2457 (Mar 4 low). Initial resistance is now located at 1.2754 (Mar 6 low) at followed by 1.2811 (Feb 26 high)

·Yen – 98.15

Initial support is located at 96.58 (Mar 6 low) followed by 96.36 (Feb 25 low). Initial resistance is now at 99.86 (Mar 5 high) followed by 100.57 (Nov 4 high).

·Pound – 1.4130

Initial support at 1.4038 (Mar 5 low) followed by 1.3957 (Mar 2 low). Initial resistance is now at 1.4385 (Feb 26 high) followed by 1.4608 (Feb 25 high).

·Australian Dollar – 0.6420

Initial support at 0.6281 (Mar 3 low) followed by the 0.6249 (Feb 2 low). Initial resistance is now at 0.6528 (Mar 4 high) followed by 0.6555 (Feb 25 high).

·Gold – 936

Initial support at 900 (Mar 4 low) followed by 891 (Feb 9 low). Initial resistance is now at 958 (Mar 2 high) followed by 963 (Feb 27 high).