Daily FX Currency Anaysis & Chart Analysis: AUD/USD

Thursday, March 5, 2009

EUR

Investors pushed the Euro down on Wednesday as investors continued to price in the likelihood of an interest rate cut from both the European Central Bank and the Bank of England alt on today. The European Central Bank is expected to cut its core rate by half a percentage point to 1.5 percent, and the Bank of England is expected to lower its rate to 0.5 percent on Thursday, also by half a percentage point. Lower interest rates can weaken a currency as investors move funds to where they earn better returns elsewhere.

At 5PM GMT, the Euro was flat versus the dollar at 1.2573, down 1% versus the CAD at 1.61, and up slightly to the Swiss Franc at 1.4796.

GBP

Consumer confidence in the United Kingdom improved in February according to data released on Wednesday. The numbers though were seen as more as more of a psychological boost than a true indication of what the mood is today as the core negative number was still quite high. 77% of those polled for the survey believed that the economic situation is the same or will get worse in the future as compared to 82% who thought the same in January. The actual report also brought about questions as whether or not there is true optimism in England about recoveries considering that 40% of British mortgage holders are slated to be in negative equity by next year while the unemployment rate is predicted to surpass 8% by the fourth quarter – a number not seen since 1996.

The Sterling reacted to this news by falling 1/2% to the Euro to .8896, rising 3/4 top the Franc at 1.6625 and rising to the US Dollar to 1.413.

AUD / JPY

The Australian Dollar gave back some its big gains from Tuesday early in the session but later recovered after data showed that the Australian GDP reports shocked the market by showing that the economy contracted for the first time in eight years last quarter.

In Japan, the Yen was hurt when Bank of Japan board member, Miyako Sudo, said that he was unsure if the Japanese economy has hit rock bottom yet and pointed to the rapidly falling stock prices as one of the reasons. Giving traders even less confidence in the Yen than they already had.

At 5:30 GMT the AUD was up 1% to the USD to .6439 and the same to versus the Euro to 1.9515, up 2 to the Yen at 63.85 and down 1/2% to the KIwi at 1.2815. While the Yen was down 1% to the CHF to 84.27, down 1 1/4 to the Euro to 124.68 and down 1% to the USD to 99.27.

Chart – AUD/USD

These have been interesting days for the AUD/USD, which recently rejected an attempt down through some key support levels, including especially the rising line of consolidation shown in the chart below and also the flatline support at 0.6330, which was also rejected. This rejection and the strong follow up rally have bullish reversal written all over it, though for more confirmation, we'd like to see a move up through 0.6555 area resistance and/or the falling line of consolidation. As a background note, we again point out the relatively resilient AUD through all of the turmoil we have seen in recent months and despite the new lows posted by many global equity markets in recent days.

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