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Daily FX Report

Australian consumer sentiment in May edges up from a 15−year low hit in April

Wed, May 21 2008, 08:35 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Former US Federal Chairman Alan Greenspan said that the long term outlook in EUR/USD is not clear and he doesn’t know where the level should be. He added that the reason for the current weakness of the USD is obviously the difference in interest rates.

Markets review

According to a survey the Australian consumer sentiment in May edges up from a 15-year low hit in April, breaking a run of 4 straight monthly falls. The data comes as the government announced tax cuts worth A$47 billion over the next four years. AUD/USD rose 0,5%, just below a 24-year high of 0,9619.

The USD fell on Tuesday as talk of higher euro zone interest rates prompted investors to increase exposure to the EUR. Additionally, inflation data muddied the US interest rate outlook. The US producer prices complicated the outlook. Overall prices advanced less than expected, but core inflation, which strips out volatile food and energy prices, rose larger than expected. Concern about further credit-related losses and their impact on financial markets also sent the USD tumbling against the low-yielding currencies, while a new record high oil price over 128,00 added the fears about surging price pressures. The EUR/USD was up 0,95% at 1,5664, GBP/USD was up 1% at 1,9683, USD/CHF was down 1,6% at 1,0360 and the USD/JPY was down 0,7% at 103,63 at the end of yesterday’s trading session.

Investors are now awaiting Germany’s Ifo index of business sentiment for May due later in the day for more clues on whether the EUR will extend its gains. “A better than expected Ifo data is likely to boost the EUR/USD above the 1,5700 level.” said a market trader.

Technical analysis

AUD/USD

A strong bullish trend beginning in January was broken in March and rebounded at the beginning of April. In May there was a short side movement period that finally broke the strong resistance at 0,9501 upwards. This break raises hopes for more long potential.

EUR/USD

In EUR/USD there is a wide trading range that moves slightly up. This range started on May 16th around 1,5450 and moved within two days up to 1,5650. After a rebound down under 1,5500 the market moved up to around 1,5750 yesterday. With the current volatility there could be further moves in this wide range.

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Published on  Wed, May 21 2008, 08:52 GMT

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