Australian FOREX Daily Outlook 31/01/2007

CURRENCY TRADING SUMMARY –31 JANUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) remained steady with majors trading in tight ranges as investors await the FOMC decision on interest rates. The dollar received little support from a US consumer confidence index that was in-line with expectations. In other markets the NASDAQ was up 7.55 points (0.31%) whilst Dow Jones was also up 32.53 points (0.26%) With colder weather encompassing the US, Crude Oil rose by US$2.83 (5.24%) to US$56.88 a barrel. Looking ahead, in a data-heavy day for the US plenty of interest surrounds the FOMC interest rate decision with market expecting unchanged rates at 5.25%. Markets will focus on statements that accompany the Fed decision to see what it suggests for future rates moves. In related news, GDP (Q4) is also scheduled for release with market reports suggesting an increase of 3.0% higher than the previous 2.0%. Other key data out of the US will be in the form of the Chicago PMI with expectations being at 52.0 higher than the previous 51.6.

• The Euro (EUR) remained steady against the US despite German CPI data coming in worse than expected at 1.6% lower than the expected 2.1% and higher than the previous 1.4%. This was largely due to markets awaiting the FOMC interest rate decision. The EURUSD traded within a low of 1.2942 and a high of 1.2982 before closing at 1.2961in the New York session. Looking ahead key data is due for release in the form of the Unemployment Rate (Dec) with the market expecting 7.6% (unchanged). In other news the CPI flash estimate for the month of January is also made public where reports are insinuating a 2.10% figure, higher than the previous 1.90%.

The Japanese Yen (JPY) continues to experience weak economic data with the Unemployment Rate rising to 4.1% in December from an eight year low of 4.0% for the month of November. Overall household spending in Japan fell by -1.9%, lower than the market expectation of a -1.2% decline. On a positive note, industrial production rose to 0.7% better than the expected 0.3% largely due to a weakening JPY. In other news, the yen rose sharply against the Euro after German Finance Minister Peer Steinbrueck said the Euro-Yen exchange rate will be discussed at next week’s meeting of the G7 nations. The USDJPY remained steady in expectation of the FOMC statement trading within a narrow range, reaching a low of 121.47 and a high of 122.20 before closing at 121.62 in the New York Session. Looking ahead, key data continues to be released from Japan in the form of Manufacturing PMI with the previous index being at 53.1. UPDATE: Manufacturing PMI at 53.4 higher than the expected 53.1

• The Sterling (GBP) rose against the dollar as investors focused on possible inflows from corporate takeover activity and strong British economic fundamentals. Mortgage approvals experienced the weakest rise since April 2006 holding a less than expected impact on the market. Overall, the GBPUSD traded with a low of 1.9595 and a high of 1.9697 before closing at 1.9613 in the New York session.

• The Australian Dollar (AUD) remained steady trading with a low of 0.7703 and a high of 0.7737 before closing the day at 0.7720 in the New York session.

• Gold (XAU) rose inline with the hike in oil prices, climbing by US$ 2.30 an ounce to US$645.50.

TECHNICAL COMMENTARY

• Euro 1.2960

Initial support at 1.2876 (Jan 26 low) followed by 1.2865 (Jan 12 reaction low). Initial resistance is now located at 1.3054 (Jan 9 high and 38.2% of 1.3368 to 1.2865) followed by 1.3117 (50% retracement of the 1.3368 to 1.2865 decline).

• Yen 121.65

Initial support is located at 121.21 (Jan 26 low) followed by 120.19 (Jan 25 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 – 1.9615

Initial support at 1.9549 (Jan 29 low) followed by 1.9512 (61.8% retracement of the 1.9262 to 1.9917 advance). Initial resistance is now at 1.9733 (50% retracement 1.9917 to 1.9549 &amp approx. Jan 25 high) followed by 1.9833 (Jan 24 high &amp approx. 61.8% retracement of 1.9917 to 1.9549)

• Australian Dollar – 0.7720

Initial support at 0.7698 (50% retracement of the 0.7414 -0.7982 rally) followed by 0.7631 (61.8% retracement of the .7414 – 0.7982 rally). Initial resistance is now at 0.7753 (Jan 26 high) followed by 0.7821 (Jan 25 high).

• Gold – 647.65

Initial support at 641.10 (Jan 26 low) followed by 639.25 (Jan 24 corrective low). Initial resistance is now at 654.60 (Jan 25 high) followed by 656.20 (Aug2, 2006 reaction high)