Australian FOREX Daily Outlook 18/06/2008

Bank of England facing inflation Crisis, Aussie grinding higher.

CURRENCY TRADING SUMMARY – 18th June 2008 (00:30GMT)

·                U.S. Dollar Trading (USD) mixed data kept most of the majors in a fairly tight range. May Housing starts were slightly less than forecasted coming in at .975 Million vs. a revised April figure of 1.008Million. May PPI came in very strong at 1.4% but the more critical Core PPI came in at expectations of 0.2% month on month. Most of the dollar weakness stemmed from the sharply lower May Industrial output at -0.2% vs. economists looking for a gain of 0.1% this month. In the US share markets, the NASDAQ was down 17 points (0.69%) and the Dow Jones was down 108 points (0.89%). Crude Oil closed down $0.60 ending the New York session at $134.01 per barrel. Looking ahead US Crude inventories are keenly awaited by commodities traders.

·                The Euro (EUR) traded higher early after newspaper reports that the US Fed wouldn’t be able to raise rates quickly as currently priced in by the markets. Into the European session comments from ECB’s Smaghi suggested that one 25bps hike will be enough to stem Eurozone inflation for the next two years and sent the euro below 1.5500. Disappointing German ZEW survey results for Jun (-52.4 vs. -42.4 expected) saw the days lows plumbed but further downside was hampered by mixed US data. Overall the EUR/USD traded with a low of 1.5461 and a high of 1.5552 before closing the day at 1.5513 in the New York session.

·                The Japanese Yen (JPY) has been consolidating recent gains with dips being very shallow and profit taking on rallies preventing further gains. Japanese Monetary policy minutes showed the BoJ eyeing risks both to the upside and downside.  Overall the USDJPY traded with a low of 107.61 and a high of 108.40 before closing the day around 107.99 in the New York session.

·                The Sterling (GBP) saw strong May CPI figures (3.3% vs. 3.2% expected) quickly turned into a rout for the pound as BoE’s King was required to write a letter explaining the high figure. In the letter the Governor made some quite dovish remarks stating the increasing interest rates at the moment to fight inflation could send the UK into a severe downtown on the back of a slumping housing sector. Overall the GBP/USD traded with a low of 1.9471 and a high of 1.9697 before closing the day at 1.9566 in the New York session. Looking ahead, the BoE June meeting minutes are released and Governor King speaks.

·                The Australian Dollar (AUD) continued to grind higher after recent losses shrugging off the neutral RBA minutes which suggested that current interest rates were appropriate. Lackluster US data & AUD’s high yielding status supported. Overall the AUD/USD traded with a low of .9390 and a high .9454 before closing the day at .9450.

·                Gold (XAU) was little changed up 60 cents on the day as a slightly weaker USD and weak stocks supported. Overall trading with a low of USD$876.70 and high of USD$887 ending the New York session at USD$886 an ounce.

TECHNICAL COMMENTARY

 

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.5303	1.5461	1.5515	1.5552	1.5859
USD/JPY	106.24	106.80	107.95	108.61	108.98
GBP/USD	1.9410	1.9471	1.9570	1.9698	1.9755
AUD/USD	0.9291	0.9304	0.9445	0.9491	0.9527
XAU/USD	850.00	858.00	883.00	894.75	895.00

·                Euro – 1.5515

Initial support at 1.5461 (June 17 low) followed by 1.5303 (June 13 low). Initial resistance is now located 1.5552 (Jun 17 High) at followed by 1.5587 (Jun 12 high).

·                Yen – 107.95

Initial support is located at 106.8 (June 12 low) followed by 106.24 (Jun 10 low). Initial resistance is now at 108.61 (Feb 14 high) followed by 108.98 (Jan 14 high).

·                Pound – 1.9570

Initial support at 1.9472 (June 17 low) followed by 1.9410 (Jun 13 low). Initial resistance is now at 1.9698 (Jun 17 high) followed by 1.9755 (June 10 high)

·                Australian Dollar – 0.9445

Initial support at 0.9304 (50% retracement of the .8953 to 0.9655 advance) followed by 0.9291 (May 15 low). Initial resistance is now at 0.9491 (Jun 12 high) followed by 0.9527 (Jun 10 high).

·                Gold – 883

Initial support at 858 (Jun 12 low) followed by 850 (Psychological Number). Initial resistance is now at 894.75 (June 16 high) followed by 895 (Jun 10 high).