Australian FOREX Daily Outlook 23/01/2007

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

• U.S. Dollar Trading (USD) following strong economic data with regards to consumer sentiment last week the USD remained solid, lifting against all other majors. In the absence of any market moving economic data, investors sought to take profits in the majors. In other markets, The Dow Jones index ended weaker dropping by 88.37 points (-0.7%), whilst the NASDAQ also dropped by 20.24 points (-0.83%). Crude oil continues to fluctuate, dropping by US89c to US$51.10 a barrel. Looking ahead, the Richmond Fed survey is due out tonight.

• The Euro (EUR) overall edged down slightly against USD, dropping by 0.2%. The EURUSD reached a low of 1.2923 and a high of 1.2979 before closing in the New York session at 1.2953. However, the EURJPY firmed by 0.3% to 157.51, further edging towards a record high of 158 against the JPY. In other news, the Euro also reached recent 8 year peaks against the Swiss Franc.

• The Japanese Yen (JPY) continues to experience pressure almost falling to a 4 year low against the USD, with the trend being investors looking for the yield. As a result, net Yen short positions have reached a record high, yet economic analysts believe such extreme positioning would not stop the Japanese Yen from weakening any further. The Yen also fell against other high yielding currencies, resulting in a near decade low against the AUD reaching 95.98 and a 1 year low versus NZD. Overall the USDJPY traded at a low 121.21 and a high 121.80 before closing at 121.61 in the New York session. Looking ahead, following the Bank of Japan’s decision last Thursday to keep interest rates unchanged, markets attention will be focused on the Bank of Japan’s Monetary Policy minutes being released later today.

• The Sterling (GBP) continued to trade within a tight range reaching a low of 1.9717 and a high of 1.9789 before closing at 1.9763. The Sterling continued to trade steadily against the USD, whilst reaching 2.5 year highs against the EUR. Looking ahead, the BoE’s Governor King is expected to speak with a Q&amp A session allocated after.

• The Australian Dollar (AUD) traded within a range of 0.7876 as the low and a high of 0.7906 before closing at 0.7882 in the New York session. PPI data released saw a rise of 0.2% lower than the expected 0.3% and significantly down from the previous 1.0%. As a result of a weaker PPI, investors sought to sell AUD to lock in profits following its recent run. Looking ahead, CPI is due for release tomorrow.

• Gold (XAU) hit three-week highs near $640 an ounce on short-covering before conceding its gains. Gold eased by $2.10 to $634.30 an ounce.

TECHNICAL COMMENTARY

• Euro 1.295

Initial support at 1.2897 (Jan 18 low) followed by 1.2865 (Jan 12 low). Initial resistance is now located at 1.3002 (Jan 19 high) followed by 1.3016 (Jan 11 high).

• Yen 121.60

Initial support is located at 120.47 (Jan 18 low) followed by 120.06 (Jan 15 corrective low). Initial resistance is now at 122.38 (61.8% retracement of the 135.18 to 101.67 decline) followed by 122.88 (Dec 13 2002 high).

• Pound – 1.9765

Initial support at 1.9636 (Jan 18 low) followed by 1.9571 (Jan 15 low). Initial resistance is now at 1.9788 (Jan 18 high) followed by 1.9849 (Dec 1 2006 high).

• Australian Dollar – 0.7880

Initial support at 0.7855 (Jan 18 low) followed by 0.7812 (Jan 17 corrective low). Initial resistance is now at 0.7908 (Jan 19 high) followed by 0.7922 (Jan 4 high).

• Gold – 634.40

Initial support at 620.4 (Jan 17 corrective low) followed by 610.00 (Jan 12 low). Initial resistance is now at 640.03 (Jan 22 high) followed by 645.0 (Jan 3 reaction high).