Australian FOREX Daily Outlook 13/05/2008

GBP rallies on the back of sturdy PPI, ahead of Retail Sales and CPI figures today

CURRENCY TRADING SUMMARY – 13 MAY 2008 (00:30GMT)

·                U.S. Dollar Trading (USD) was mixed against the majors on Monday, losing ground on the majority bar the Japanese Yen. In Fiscal policy, the US Government reported a 159.3 Billion surplus in April largely boosted by Tax receipts. In U.S. share markets the NASDAQ was up by 42.97 points (+1.76%) whilst the Dow Jones was also higher by 130.43 points (+1.02%). Crude oil set another record high of US$126.40, although falling US$1.73 a barrel to end at US$124.23. Looking ahead on Tuesday, much focus surrounds that of Chairman Bernanke heading a number of speeches from the Federal Reserve. In other data, Retail Sales for the month of April is made public with forecasts surrounding that of a decline by -0.1%, previous 0.2%.        

·                The Euro (EURO) lifted throughout the day, well above last weeks lows as confidence in the market prompted a return to demand for the single currency. The moves may have been exaggerated as many markets remained closed for the Whit Monday holiday. In policy news, ECB member Quaden commented that interest rates were not hindering growth which only added to further demand for the Euro. Overall the EURUSD traded with a low of 1.5367 and a high of 1.5541 before closing the day at 1.5534 in the New York session.  

·                The Japanese Yen (JPY) lost ground against a number of currencies as rallying stocks and confidence in financial markets paved the way for investors to purchase high yielding assets funded by the Yen. Overall the USDJPY traded with a low of 102.62 and a high of 104.04 before closing the day at 103.73 in the New York session.

·                The Sterling (GBP) was one of the best performing currencies overnight, rebounding from three month lows against the dollar as UK Producer prices caused traders to trim bets that the BoE would look to cut rates in their next meeting. The April figures for PPI revealed that input prices jumped by 2.4%, whilst output prices also rose by 1.4%, with analyst suggesting the underlying factor to be that of record food and energy prices. The BoE is now faced with growing concern of stagflation, with a drop in growth and an upward pressure in inflation. Overall the GBPUSD traded with a low of 1.9444 and a high of 1.9633 before closing the day at 1.9621 in the New York session. CPI and Retail Sales now take the spotlight as traders try delving into how high inflation remains in the UK.

·                The Australian Dollar (AUD) was subject to equity market and commodities rallying through the day. Overall AUDUSD traded with a low of 0.9358 and a high of 0.9475 before closing the day at 0.9471 in the New York session.

·                Gold (XAU) fell as Oil paired its gains. XAU effectively traded in a range of 878.35 and a high of 889.70.  

TECHNICAL COMMENTARY                                                   

·                Euro – 1.55525

Initial support at 1.5367 (May 12 low) followed by 1.5284 (May 8 low). Initial resistance is now located at 1.5571 (May 12 high) followed by 1.5595 (May 6 high).

·                Yen – 103.90

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 104.04 (May 12 high) followed by 104.96 (May 8 low).

·                Pound – 1.9530

Initial support at 1.9444 (May 12 low) followed by 1.9410 (Feb 21 low). Initial resistance is now at 1.9633 (May 12 high) followed by 1.9736 (May 7 high).

·                Australian Dollar – 0.9460

Initial support a 0.9350 (May 8 low) followed by 0.9342 (May 5 low). Initial resistance is now at 0.9483 (May 12 high) followed by 0.9510 (May 6 high).

·                Gold – 883.00

Initial support at 864.20 (May 7 low) followed by 846.00 (May 2 low). Initial resistance is now at 889.80 (May 12 high) followed by 896.50 (Apr 25 high).