Australian FOREX Weekly Outlook 28/07/2008

Dollar Gains as Interest Rates look set to Rise

28/07/08

last week’s currency trading review

The Dollar gained across the board after ultra-hawk Fed Member Plosser commented on Tuesday that the Fed’s Interest Rate Policy should be reversed as quickly as possible. Also buoying the Greenback was multiple economic reports beating forecasts. June Durable Goods Orders surprised to the upside coming in +0.8% vs. expectations of -0.3%. Housing data improved with New Home sales coming at 530K vs. expectations of 505K.Weekly Jobless Claims jumped to 406K well above expectations of 379K but continuing claims dipped 9K to 3.107 Million. Also supporting was the Revised University of Michigan Consumer Sentiment jumping to 61.2 from a preliminary reading of 56.2. The Euro lost ground against the USD and GBP this week as Oil continued to retreat and Eurozone Data disappointed. The July German IFO fell below 100 for the first time since 2005 and the European Services and Manufacturing PMI’s both fell under 50 to 48.3 and 47.5 respectively. Some support was seen from the higher than forecast German Import Price Index at 1.5% in June vs. expectations of a 1% increase. The Euro closed down 0.94% at 1.5701 having opened at 1.5848. The Japanese Yen traded in a large range as equity volatility continued especially on Thursday’s US lead stock decline. Commodity crosses came under pressure as the Oil and Gold lead the pullback. Japans trade surplus fell to 138 Billion Yen on increased Imports and the June CPI rose to 1.9% y/y. GBP/JPY traded to new highs multi-month highs above 215. The USD/JPY gained 0.86% closing at 107.89, after opening the week at 106.96. The GBP fell against the USD but gained against all the other Majors as MPC July Meeting minutes showed a surprise 7-1-1 with Member Beasley voting for a cut. Pulling the GBP lower on Thursday was a record breaking drop in June Retail Sales of -3.9%. The GBP/USD lost 0.39% closing at 1.9912 after opening at 1.9990. The AUD fell heavily during the week as commodities experienced a broad based sell off. Gold fell over $40 during the week. Q2 PPI fell to 1.0% vs. expectations of 1.6%. Q2 CPI jumped to 1.5% from 1.3% in Q1 and well over expectations of 1.0%. The AUD/USD closed down 1.46% at 0.9559 after opening at 0.9699.

The forex trading week preview

In the States A big data week beginning on Tuesday with the July Consumer Confidence expected to fall to 50 from 50.4 in June. The Case-Schiller HPI is expected to fall -16% y/y. Wednesday we have July ADP Employment Change expected at -60K improving from -79K in June. On Thursday we get advanced Q2 GDP forecasted at 2% Q/Q up from 1% in Q1. Also released is the Weekly Jobless Claims forecast to drop back under 400k to 380K. July Chicago PMI is forecast to weaken slightly to 49 from 49.6 in June. On Friday we have the week’s big event risk with the July Non Farm Payrolls forecast at -75K weaker than the -62K seen in June. The July Manufacturing PMI is seent at 49.2 falling below the critical 50 level. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone German Gfk Consumer Confidence starts the week off on Monday expected at 3.5. On Tuesday we have the preliminary German CPI figures tentatively released. Wednesday sees the Eurozone Consumer Confidence at -18 slightly worse than -17 in June. Also released is the German June Retail Sales seen down -0.4% m/m. Thursday the German Unemployment rate for June is expected to remain at 7.4% with a Unemployment change of -20K. Also released is the Eurozone CPI estimate for July seen at 4.2%. Finally on Friday we have the Eurozone Manufacturing PMI for July expected to remain below the contractionary 50 level. We will provide our previews and reviews of these data releases in the daily summary.

In Japan light data week in which Tuesday is the highlight with the Unemployment Rate expected to remain at 4.0% and June Retail Sales expected to be slightly negative at -0.2%. On Wednesday June Industrial Production is seen at -1.6% m/m. We will provide our previews and reviews of these data releases in the daily summary.

In Australia little data until Thursday which has June Retails Sales forecast flat at 0.0 after a surprising jump of 0.7% in May. Also released is the June trade Balance expected at -100 Million following a -965 Million reading in May. We will provide our previews and reviews of these data releases in the daily summary.

·Euro – 1.5695

Initial support at 1.5629 (July 24 low) followed by 1.5612 (July 23 low). Initial resistance is now located 1.5799 (July 23 high) at followed by 1.5948 (July 16 High).

·Yen – 107.95

Initial support is located at 106.58 (July 25 low) followed by 106.06 (July 22 low). Initial resistance is now at 107.99 (Jun 24 high) followed by 108.59 (Jun 16 high).

·Pound – 1.9885

Initial support at 1.9815 (July 14 low) followed by 1.9754 (July 11 low). Initial resistance is now at 1.9990 (July 24 high) followed by 2.0077 (July 22 high).

·Australian Dollar – 0.9530

Initial support at 0.9477 (July 9 low) followed by 0.9404 (Jun 18 low). Initial resistance is now at 0.9675 (June 17 low) followed by 0.9794 (July 22 High).

·Gold – 930

Initial support at 912.9 (July 8 low) followed by 908.65 (Jun 19 low). Initial resistance is now at 949.25 (July 23 high) followed by 976 (July 22 high).