Australian FOREX Daily Outlook 05/01/2007

ISM non-manufacturing improves. Gold and oil stumble again. Greenback gains on the majors as market awaits non-farm payrolls.

CURRENCY TRADING SUMMARY –5 JANUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) was markedly stronger for the second day straight against the majors in the overnight forex session as data released overnight was less than positive, but prompted market participants to ease rate cut expectations from the Federal Reserve. Factory orders came in at 0.9% compared to a 1.4% rise and the US ISM non-manufacturing came in at 57.1 from a 57 estimate but still less than previous result of 58.9. In other markets, the Dow Jones index rose 6pts and the NASDAQ climbed 30pts with the drop in crude oil helping retailers and transport stocks. Crude oil fell US$2.73 to US$55.59 a barrel as rising US inventories and mild weather in the largest energy consumer prompted the drop in oil. Looking ahead, non-farm payrolls and unemployment are due out tonight.

• The Euro (EUR) traded within a low of 1.3076 and a high of 1.3180, before closing at 1.3085 in the New York session. On the data front, PMI services came in at 57.2 from a 57.8 estimate. Looking ahead, consumer confidence and PPI are due out today.

• The Japanese Yen (JPY) traded within a low of 119.06 and a high of 119.52 versus the dollar, before closing at 119.08 in the New York session. On the data front, a news report suggested that the Bank of Japan will discuss lifting its interest rate at its next meeting Jan 17-18.

• The Sterling (GBP) traded within a low of 1.9398 and a high of 1.9531, before closing at 1.9441 in the New York session. On the data front, PMI services came in at 60.6 from a 59.5 estimate. The Gfk index slipped to -8 from a -6 estimate.

• The Australian Dollar (AUD) traded within a low of 0.7830 and a high of 0.7918, before closing at 0.7843 in the New York session.

• Gold (XAU) fell by US$5.25 to US$622.50 an ounce in response to a stronger US dollar and weaker oil price.

TECHNICAL COMMENTARY

• Euro 1.3090

Initial support at 1.3052 (Dec 18, 2006 reaction low) followed by 1.303 (38.2% retracement of the 1.2483 to 1.3368 advance). Initial resistance is now located at 1.3181 (Jan 4 high) followed by 1.3298 (Jan 2 corrective high).

• Yen 118.90

Initial support is located at 118.49 (Jan 2 corrective low) followed by 118.28 (Dec 27, 2006 corrective low). Initial resistance is now at 119.7 (Jan 3 high) followed by 119.9 (Oct 13, 2006 reaction high).

• Pound – 1.9440

Initial support at 1.9342 (50% retracement of the 1.8835 to 1.9849 advance) followed by 1.9222 (61.8% retracement of the 1.8835 to 1.9849 advance). Initial resistance is now at 1.9532 (Jan 4 high) followed by 1.9753 (Jan 3 high).

• Australian Dollar – 0.7835

Initial support at 0.7808 (Dec 27, 2006 corrective low) followed by 0.7779 (Dec 15, 2006 reaction low). Initial resistance is now at 0.7922 (Jan 4 high) followed by 0.7982 (Jan 3 trend high).

• Gold – 622

Initial support at 620.97 (Jan 4 low) followed by 612.07 (Dec 18 low). Initial resistance is now at 645.0 (Jan 3 high) followed by 650.2 (Dec 1, 2006 reaction high).