Australian FOREX Daily Outlook 14/05/2009

Stocks Drop as Mood darkens

CURRENCY TRADING SUMMARY – 14th May (00:30GMT)

·                U.S. Dollar Trading (USD) enjoyed a major reversal of direction with sentiment turning overnight. Weak US Retail Sales of -0.4% in April sent US stocks skidding over 2% down. Also dampening sentiment was the commentary from BOE’s King that the risk was skewed to a protracted economic downturn. Crude Oil was down -$1.60 ending the New York session at $57.88 per barrel. In US share markets, the Nasdaq was down 51 points or -3.00% and the Dow Jones was down 184 points or -2.18%. Looking ahead, Weekly Jobless Claims are forecast at 610k vs. 601k previously.

·                The Euro (EUR) fell overnight although not as sharply as most currencies. During the Asian session the EUR/USD traded near 6 week highs above 1.3700. The main falls were seen in EUR/JPY which broke through 130 Yen. March Industrial Production was at -2% vs. -1% forecast. Overall the EUR/USD traded with a low of 1.3563 and a high of 1.3709 before closing at 1.3650.

·                The Japanese Yen (JPY) strengthened considerably as the crosses joined the USD/JPY is sliding aggressively. AUD/JPY was a leader on the way up and also led on the way down. Overall the USDJPY traded with a low of 95.11 and a high of 96.71 before closing the day around 95.45 in the New York session. Looking ahead, March Machine Orders are forecast at -4.5% vs. 1.4% previously.

  ·              The Sterling (GBP) fell back after the Bank of England inflation report showed that CPI should stay below 2% for the next 3 years. This slow recovery view is at odds with the green shoots commentary form other Central Banks around the world. EUR/GBP traded above 0.9000 before once again slipping form this key level. Overall the GBP/USD traded with a low of 1.5084 and a high of 1.5335 before closing the day at 1.5140 in the New York session.

·                The Australian Dollar (AUD) fell heavily after failing at the 0.7700 for the second time. The sharp pullback in commodities also weighed. Risk appetite is a major source of direction for the commodity currency so equity markets are watched closely. Overall the AUD/USD traded with a low of 0.7507 and a high of 0.7708 before closing the US session at 0.7535.

·              Gold (XAU) fell back after testing the $930 level as the USD strengthened into the close. Overall trading with a low of USD$916 and high of USD$931 before ending the New York session at USD$925 an ounce.

·                Euro – 1.3530

Initial support at 1.3343 (May 8 low) followed by 1.3247 (May 6 low). Initial resistance is now located at 1.3739 (March 19 high) followed by 1.3799 (Jan 8   high)

·                Yen – 95.30

Initial support is located at 94.15 (May 20 low) followed by 93.54 (Mar 19 low). Initial resistance is now at 97.84 (May 12 high) followed by 98.82 (May 11 high).

·                Pound – 1.5105

Initial support at 1.5070 (May 11 low) followed by 1.4944 (May 7 low). Initial resistance is now at 1.5373 (Jan 8 high) followed by 1.5477 (38.2% retrace 1.3503-1.8669).

·                Australian Dollar – 0.7530

Initial support at 0.7508 (May 8 low) followed by the 0.7459 (May 7 low). Initial resistance is now at 0.7738 (Oct 6 high) followed by 0.8097 (Sept 30 high).

·                Gold – 924

Initial support at 906 (May 8 low) followed by 895 (May 6 low). Initial resistance is now at 933 (Apr 1 high) followed by 945 (Mar 26 high).

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