Australian FOREX Daily Outlook 16/05/2008

Growth in Europe rises by 0.7%, XAU rebounds by $20  

CURRENCY TRADING SUMMARY – 16 MAY 2008 (00:30GMT)

·                U.S. Dollar Trading (USD) was mixed once again versus a number of majors as Fed Reserve Chairman Bernanke encouraged banks to continue raising capital post credit turmoil, in order to minimize further damage on the U.S. economy. In data specific news the March release of Capital Net flows was well above expectations at 80.4 bln, whilst the Empire State Manufacturing survey declined by -3.23  from 0.63 in May. In U.S share markets the NASDAQ was higher by 37 points (+1.5%) whilst the Dow Jones was also higher by 94 points (+0.7%). Continued to ease as Iran confirmed it has no plans to cease exports, pushing it lower by US$0.10 a barrel to US$124.12. Friday sees the release of May Housing Starts, which is expected to come in at 940K down from the previous 947K. Furthermore, the Michigan Sentiment Survey is also made public, forecasted to come in at 62.      

·                The Euro (EURO) was buoyed initially by first quarter growth, up by 0.7% (Forecasts: 0.5%), whilst CPI data fell from 3.6% to 3.3% on an annual basis during the month of April, adding to notions that the ECB will hold rates for the time being. The Euro later gave up much of its gains on a stronger dollar and lower oil prices. The EURUSD traded with a low of 1.5417 and a high of 1.5546 before closing the day at 1.5452 in the New York session.  

·                The Japanese Yen (JPY) The Bank of Japan will probably keep interest rates on hold next week after it slashed its growth estimate and shelved a two-year policy of seeking higher borrowing costs. Overall the USDJPY traded with a low of 104.43 and a high of 105.29 before closing the day at 104.71 in the New York session.  

·                The Sterling (GBP) traded in a 100 point range for much of the day, tracking other majors as little data was made available from the UK. Overall the GBPUSD traded wit ha low of 1.9405 and a high of 1.9502 before closing the day at 1.9466 in the New York session.  

·                The Australian Dollar (AUD) rallied throughout the day, boosted by commodities as gold $20 an ounce.   Whilst Speaking in Sydney, RBA Governor Stevens that the fight against price pressures may not be comfortable in the immediate future, although did expect GDP to slow noticeably in the coming years. The Governor also made mention of the Chinese Economy, stating that the economy is “overheating”, predicting it may rival the largest economies in the world within a generation. Overall the AUDUSD traded with a low of 0.9292 and a high of 0.9420 before closing the day at 0.9420 in the New York session.      

·                Gold (XAU) was boosted by strong physical buying in Asia trading with a high of 887.50 and a low 862.70. XAU ended the day up by US$13.50 an ounce to closing at US$880.00

TECHNICAL COMMENTARY                                                   

·                Euro – 1.5460

Initial support at 1.5453 (May 15 low) followed by 1.5367 (May 12 low). Initial resistance is now located at 1.5547 (May 15 high) followed by 1.5571 (May 12 high).

·                Yen – 104.60

Initial support is located at 104.43 (May 15 low) followed by 103.39 (May 13 low). Initial resistance is now at 105.59 (May 7 high) followed by 106.65 (Feb 28 low).

·                Pound – 1.9475

Initial support at 1.9363 (May 14 low) followed by 1.9338 (Jan 22 reaction low). Initial resistance is now at 1.9530 (61.8% retracement of the 1.9633 to 1.9363 decline) followed by 1.9586 (May 13 high).

·                Australian Dollar – 0.9415

Initial support a 0.9291 (May 15 low) followed by 0.9272 (Apr 18 low). Initial resistance is now at 0.9428 (May 14 high) followed by 0.9483 (May 12 high).

·                Gold – 883.00

Initial support at 860.50 (May 14 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).

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