Australian FOREX Weekly Outlook 19/11/2007

Focus on BoE and FOMC minutes.  

19/11/07                                                                                                                                                                                                                 

last week’s currency trading review

The Dollar was choppy throughout the week of trading positing its biggest weekly gain within the last month against a basket of majors. During the week the Fed had announced increased measures to improve its communication ties with markets, increasing publications from two times to four times a year. The USD was supported by sturdy readings in both CPI and PPI reports which had shown an increase in inflation risks. Retail sales also came in relatively flat on consensus, whilst pending home sales surprised on the upside. Comments by Fed member Kroszner on Friday warned markets not to expect any further rate cuts from the Central Bank, downplaying monetary easing in December. The Euro remained resilient despite a number of majors suffering as a result of risk aversion. The Euro was supported by positive readings in GDP and CPI, ensuring that the Euro closed last week at 1.4656 having opened at 1.4671. The Japanese was the most active throughout the week, due to risk aversion and carry trade unwinding as a result of a drop in global stock prices ensured the USDJPY pair traded at a 1 ½ year low. The Japanese Yen closed last week at 110.74 having opened at 114.60 earlier in the week. The GBP was the worst affected currency throughout the week suffering from carry trades being unwound, as well as ongoing liquidity issues, highlighted by Barclays $2.7 billion write down. Accompanying poor data, BoE governor kings comments of expectations that growth will slow sharply in 2008 fueled talk of rate cuts from the BoE in the coming months. The GBP closed last week at 2.0524 having opened at 2.0910.The AUD traded on the back of other majors in what was a quiet data week for Australia. Instead the AUD found volatility on increasing risk aversion impacting the high yielding currency. The AUD closed last week at 0.8856 having opened at 0.9279 earlier.

The forex trading week preview

In the States in what is a quiet data week for the U.S. much of the markets focus will be placed on the FOMC minutes of the October 31 meeting set to be made public on Tuesday, which will also be accompanied by Housing Starts for the month of October. Initial Jobless claims and Michigan Sentiment survey appear to be the other releases worth mentioning on Wednesday before markets close on Thursday for the Thanksgiving holidays. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone in a thin data week speeches from ECB officials hold most weight with ECB’s Almunia expected to concentrate on currencies (Wednesday) whilst President Trichet will also talk later in the week (Friday). In data specific news Manufacturing PMI and Services PMI are scheduled for release on Friday. In the UK with talk of a possible rate cut growing in momentum, the BoE minutes out on Wednesday are sure to give markets a clearer indication on future monetary policy outcomes by the central bank and views endorsed by its MPC members. We will provide our previews and reviews of these data releases in the daily summary.

In Japan sees the release of Trade Balance for the month of October out on Tuesday. Stock prices will once again be crucial to movements in the carry trade funding Japanese Yen.   We will provide our previews and reviews of these data releases in the daily summary.

In Australia has little to data scheduled to cause any excitement, in which the AUD is expected to trade on the back of other majors. We will provide our previews and reviews of these data releases in the daily summary.

Initial support at 783.20 (Nov 15 low) followed by 777.25 (Oct 31 low).      Initial resistance is now at 818.30 (Nov 15 high) followed by 845.80 (Nov 7 trend high)