Australian FOREX Daily Outlook 21/05/2008

Inflation the focus with Oil near $130

CURRENCY TRADING SUMMARY – 21st MAY 2008 (00:30GMT)

·                U.S. Dollar Trading (USD) The low headline figure of the April US PPI 0.2% vs 0.4% hurt the USD as focus on inflation in other economies took focus and US bond yields fell. The core US PPI was stronger then expected though coming at 0.4% vs 0.2% expected.   The U.S share markets fell sharply with NASDAQ down 23.83 points (-.95%) and DOW JONES down 199 points (1.53%), Oil broke   another record high gaining 1.78% to $129 per barrel on continued supply constraints and weak USD. Looking ahead later tonight the FOMC minutes come out explaining the April FED decision to cut rate .25% to 2%

·                  The Euro (EURO) The Euro received a boost after very hawkish comments from the President of the ZEW that a rate hike from ECB would counter inflation. The ZEW Economic sentiment came in at -41.4 weaker then the expected -37.5. The EURUSD traded with a low of 1.5505 and a high of 1.5680 before closing the day at 1.5645 in the New York session.   Looking ahead, important data out today from the Eurozone German IFO business climate Index expected to come in at 102.1.

·                The Japanese Yen (JPY) Muted reaction to Bank of Japans decision to hold rates at 0.5% and no change to economic outlook although it was noted that risks are still to the downside. The share market falls weighed heavily on the USDJPY overnight. The USDJPY traded with a low of 103.47 and a high of 104.47 before closing the day around 103.65 in the New York session.  Looking ahead there is no data out today from Japan.

·                The Sterling (GBP) With little data out the Pound followed other currencies and gained 1% against the weakening USD. Overall the GBPUSD traded with a low of 1.9483 and a high of 1.9718 before closing the day at 1.9680 in the New York session. Looking ahead, today the MPC minutes are released with markets expecting an 8-1 split of the April rate decision to hold at 5.00%.

·                The Australian Dollar (AUD) The Aussie was fueled by the hawkish RBA minutes which highlighted that the bank was considering another rate rise helping brake new highs above the 96 cents level. Another comment considered to be AUD positive was the banks view that the Aussie dollar could have been a lot higher given the current commodity surge. AUS/JPY broke through the key level of 100 but as unable to continue higher as falling equities weighed.   Overall the AUDUSD traded with a low of 0.9571 and a high of 0.9619 before closing the day at 0.9585 in the New York session. Looking ahead, the Westpac Consumer Sentiment is out today with expectations of a rebound to 1.8% from last months -1.3%.

·                Gold (XAU)     Gold continued to be rally above $900 surging as Oil hit record highs. Overall trading with a low of 903.35 and high of 923.40 ending the New York session at $920.

TECHNICAL COMMENTARY                                                 

·                Euro – 1.5650

Initial support at 1.5504 (May 20 low) followed by 1.5438 (May 16 low). Initial resistance is now located at 1.5681 (May 20 high) followed by 1.5712 (Former Support Apr 18).

·                Yen – 103.60

Initial support is located at 103.39 (May 13 low) followed by 102.58 (May 12 low). Initial resistance is now at 104.48 (May 20 high) followed by key 105.44 (May 14 high).

·                Pound – 1.9675

Initial support at 1.9480 (May 20 low) followed by 1.9443 (May 16 low). Initial resistance is now at 1.9736 (May 7 high) followed by 1.9784 (May 9 high).

·                Australian Dollar – 0.9580

Initial support a 0.9511 (May 19 low) followed by 0.9392 (May 16 low). Initial resistance is now at 0.9618 (May 20 trend high) followed by 0.9723 (open this week + range last week*0.618).

·                Gold – 920

Initial support at 901 (May 19 low) followed by 880.5 (May 16 low). Initial resistance is now at 923.6 (May 20 high) followed by 928.75 (Apr 21 high).