Australian FOREX Daily Outlook 12/05/2008

Oil sets record highs, again. US trade deficit narrows sharply.  

CURRENCY TRADING SUMMARY – 12 MAY 2008 (00:30GMT)

·                U.S. Dollar Trading (USD) was mixed against a number of majors on Friday as the Trade deficit narrowed sharply for the month of March, with imports falling 2.9% the most since the last recession ended. The U.S. traded deficit narrowed from US$61.7 billion to US$58.2 billion. In U.S share markets the NASDAQ fell by -5.72 points (-0.23%) whilst the Dow Jones was also down by -120.90 points (-0.94%) as shares in the world’s largest insurer, AIG, fell following a reported record quarterly loss. Crude oil traded at a record high once again touching US$126.25 in after hours trading. Crude closed the session up by US$2.56 a barrel to US$125.40. Looking ahead, Fed officials are scheduled to speak on the U.S. economic outlook and financial markets today.  

·                The Euro (EURO) continued its late week revival following the ECB signal that it was unlikely cuts would materialize. Overall the EURUSD traded with a low of 1.5394 and a high of 1.5489 before closing the day at 1.5479 in the New York session.  

·                The Japanese Yen (JPY) continued its rally as equity market fell on the back of AIG profit earnings. Japanese stocks also fell adding to the moves, with several large organizations including Toyota Motor Corp. forecasted lower profit earnings in light of the global economic slowdown. Overall the USDJPY traded with a low of 102.62 and a high of 103.96 before closing the day at 102.93 in the New York session.  

·                The Sterling (GBP) eased against a number of majors on signs that the faltering economy would prompt the Bank of England to resume it easing cycle. U.K. home repossession claims by mortgage lenders rose 16 percent from a year ago to the highest since the early 1990s. Overall the GBPUSD traded with a low of 1.9461 and a high of 1.9598 before closing the day at 1.5479 in the New York session. Looking ahead, key figures in the form of PPI are scheduled out of the UK on Monday.

·                The Australian Dollar (AUD) was range bound and held firm on sturdy commodities, despite falling equities. Overall the AUDUSD traded with a low of 0.9385 and a high of 0.9465 before closing the day at 0.9430 in the New York session.  

·                Gold (XAU) rose further on supply concerns and record oil prices. XAU jumped by US$3.70 an ounce to US$885.80.

TECHNICAL COMMENTARY                                                   

·                Euro – 1.5460

Initial support at 1.5393 (May 9 low) followed by 1.5284 (May 8 low). Initial resistance is now located at 1.5540 (May 7 high) followed by 1.5595 (May 6 high).

·                Yen – 102.85

Initial support is located at 102.26 (Apr 18 low) followed by 101.91 (38.2% retracement of the 95.76 low). Initial resistance is now at 103.97 (May 9 high) followed by 104.96 (May 8 low).

·                Pound – 1.9510

Initial support at 1.9410 (Feb 21 low) followed by 1.9363 (Feb 20 reaction low). Initial resistance is now at 1.9570 (May 9 high) followed by 1.9621 (May 8 high).

·                Australian Dollar – 0.9435

Initial support a 0.9350 (May 8 low) followed by 0.9342 (May 5 low). Initial resistance is now at 0.9510 (May 6 high) followed by 0.9544 (Apr 23 high).

·                Gold – 883.00

Initial support at 864.20 (May 7 low) followed by 846.00 (May 2 low). Initial resistance is now at 889.65 (May 9 high) followed by 896.50 (Apr 25 high).