Forexsport Currency Update

CURRENCY WATCH

AUD/USD – Short term trend DOWN, Long term trend DOWN

The AUD/USD has come under renewed selling pressure as the European debt crisis takes its toll on the Australian economy.

Despite the RBA interest rate cut last week, which was passed on in full by the banks, Australian Consumer Confidence fell heavily.

China’s economy has slowed down with the trade surplus narrowing as demand for Chinese exports takes a direct hit as the world consumer economies refrain from spending.

Fed Reserve’s Bernanke said the US economy is ‘expanding moderately’ but the European debt crisis poses downside risks for the US economy. The Fed has kept rates on hold and will do so until mid 2013.

The European regulators have imposed their banks to make increases to their core capital to 9% by June 2012 instead of 2019 causing them to exit profitable operations outside their home markets.

Germany’s Merkel has vetoed a lift in the ceiling for the new European bailout fund and ratings agency Fitch sees a significant economic downturn in Europe. Basically, there is no quick solution to the European debt crisis and it will flow into the global economy.

Over the next few months, we are expecting further interest rate cuts globally, a flight to the safe haven USD and now the GBP, weaker commodity and stock markets. We do, however, expect the US economy to continue with recovery. The US economy is the global economic engine and their recovery will eventually filter through to the rest of the global economy albeit slowly.

We maintain our long term view that the AUD/USD will be sold and expect life above parity to be short lived with a return to levels between 0.8750-0.9200 over the first quarter of 2012.

The slowdown in the global economy impacts China and in turn impacts on demand for our mining exports.

The AUD/USD is currently trading at 1.0000 and we find resistance at 1.0180. We expect support at 0.9880 to be tested and head lower to 0.9650 over the next week.

EUR/AUD – Short term trend DOWN, Long term trend DOWN

The EUR/AUD has traded down to 1.2955 and is struggling to recover lost ground despite the AUD weakening also. Currently trading at 1.3035, we expect a rally back to 1.3200 whilst 1.2900 provides support. The fate of the EUR still hangs in the balance, and whilst uncertainty exists, the downside is expected to remain vulnerable.

GBP/AUD –Short term trend UP, Long-term trend UP

The GBP/AUD has rallied as the market buys GBP on safe haven. We expect the AUD to remain weak as risk is sold and favour this cross higher. Currently trading at 1.5485, support at 1.5250 is expected to hold and we look for a rally to 1.5650 and 1.5930.

AUD/JPY – Short term trend DOWN, Long term trend DOWN

The AUD/JPY is currently trading at 78.00 and we favour further weakness of the AUD/JPY over the next few weeks as JPY is bought on safe haven and AUD is sold on risk. Both the Japanese and Australian economies have seen consumer confidence fall recently and feel the Australian economy has much further to slow whilst the Japanese economy has limited downside.

Narrowing interest rate differentials between the two countries also favour a rise in JPY.

Currently trading at 78.10, we expect a test of support at 76.20 with resistance holding at 79.00.

AUD/NZD – Short term trend UP, Long term trend UP

The AUD/NZD has remained in a narrow range as both currencies are sold on the European debt crisis. Currently trading at 1.3240, we find support at 1.3120 and resistance a 1.3450.

AUD/CHF – Short term trend UP, Long term trend UP

The AUD/CHF is currently trading at 0.9467 and we expect consolidation of this cross. Support is found at 0.9310 and resistance at 0.9620.

AUD/DKK – Short term trend UP, Long term trend UP

The AUD/DKK has held up well and is currently trading at 5.7150. We expect support at 5.6750 to hold for further upside targeting 5.7600.

EUR/CHF – Short term trend UP, Long term trend UP

The EUR/CHF has remained in a narrow range and is currently trading at 1.2320. We expect further range trading between 1.2230 and 1.2420. The SNB will defend 1.2000 and we expect this level to remain intact and untested.

BETTY  LENTAKIS – betty@forexsport.com

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