Australian FOREX Daily Outlook 19/05/2008

consumer confidence falls to 28 year low 59.5 XAU back above $900 

CURRENCY TRADING SUMMARY – 19th MAY 2008 (00:30GMT)

·                U.S. Dollar Trading (USD) The dollar fell across the board as US confidence fell to a multi-decade low reading of 59.5 (62 expected) in May down from 62.6 in April due to “rising uncertainty about future living standards has caused consumers to adopt more prudent spending plans and become more wary of incurring new debt.” Also out on Friday housing Starts showed a rebound to 1.03M vs .94M expected, although all additional building was due to multi-family as opposed to single family homes. In U.S share market little changed NASDAQ down -4.88 points (-.19%) and DOW JONES down -5.86 points (-0.05%), Crude Oil gained over $2 trading at a record high as $127.82 per barrel at one stage before closing at $126.36. Quiet day on US Data.

·                  The Euro (EURO) On the back of weak US data the Euro tested 1.56 rallying from 1.545 early in the session. The Euro also received a boost from ECB president Trichet’s hawkish comments on fighting inflation creating doubts of rate easing this year.  EUR/GBP came close to breaking the key .80 level. The EURUSD traded with a low of 1.5439 and a high of 1.5602 before closing the day at 1.5580 in the New York session. Little data out of Eurozone leading into German ZEW survey tomorrow.

·                The Japanese Yen (JPY) gained against the dollar after again having a look above 105 with the drop in the Dow and bad US data precipitating a drop to lows of 103.54 before a recovery in stock market and strong buying on the crosses allowed a close above 104. Some attention being given to Financial Times article on Japan possibly allowing increased Foreign Direct Investment. The USDJPY traded with a low of 103.53 and a high of 105.09 before closing the day at 104.1 in the New York session.  Interest rate announcement is out on Tuesday with most economists believing the Bank of Japan will be keeping interest rates on hold  predicting a downturn in future data.

·                The Sterling (GBP) the pound has been under pressure lately but a strong relief rally on bad US data saw a retest of the 1.96. Overall the GBPUSD traded with a low of 1.9426 and a high of 1.9598 before closing the day at 1.9563 in the New York session. Markets now look to MPC minutes on Wednesday for Central bank thoughts on Rates.

·                The Australian Dollar (AUD) traded at a fresh 24 year high of 0.9558 on Friday on the back of weak US data and strong rally in gold and risk appetite. AUS/JPY touched 99.80 and close to critical 100 level. Overall the AUDUSD traded with a low of 0.9393 and a high of 0.9558 before closing the day at 0.9531 in the New York session. UPDATE: The Australian Dollar once again set new highs early on Monday Asian Session touching 0.9571. The RBA minutes are also scheduled for release tomorrow, as market will be looking for any hawkish comments.

·                Gold (XAU) rallied above $900 with surge in Oil stoking inflation fears being the catalyst.  Gold had a daily Low of $880 and high of $905.