Australian FOREX Daily Outlook 08/02/2007

CURRENCY TRADING SUMMARY –08 FEBRUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) was mixed against other majors on Wednesday following US economic data on productivity for the fourth quarter coming in better than expected at 3.00% (forecast: 1.8, previous: -0.1%). Labor costs out of the US were also made public with a softer figure of 1.7% than the forecasted 2.1%, suggesting that interest rates were likely to remain stable in the foreseeable future. In other markets, the NASDAQ was up 19.01 points (0.77%) whilst the Dow Jones was down 22 points (0.2%). Crude oil was down yesterday by US$1.20 to US$57.68 despite reports showing a fall in supply, with investors optimistic that reserves will be sufficient for the remainder of the of the North American winter.

• The Euro (EUR) traded higher against the USD even though data regarding German Industrial Output released was weaker-than-expected at -0.5% rather than the forecasted 0.5% for the month of December. The previous figure for the month of November saw a significantly higher level of 2.00% rise. Overall the Euro traded within a range of a low 1.2973 to a high of 1.3025 before closing at 1.3006 in the New York session. Looking ahead, the ECB is scheduled to make an announcement on interest rates later on today. With expectations of interest rates to remain on hold at 3.5%, investors are eagerly awaiting accompanying statements made by ECB President Trichet. Key attention will surround hawkish statements such as usage of the word ‘vigilance’ indicating possible future rate hikes.

• The Japanese Yen (JPY) dropped against the USD following previous day gains, as increasing expectations that the Group of Seven finance officials will not take a tough stance on the Japanese Yens broad weakness at their weekend meeting. Overall the JPY Traded within a low of 120.00 and a high of 120.82 before closing the day at 120.65 in the New York session.
• The Sterling (GBP) remained steady on Wednesday with investors cautious ahead of the BoE interest rate announcement later on today. Overall the GBPUSD traded with a range of a low 1.9673 and a high of 1.9734 before closing the day at 1.9692 in the New York session. Looking ahead, the BoE is scheduled to make an announcement on interest rates with wide expectations that they will remain on hold at 5.25%. Following the rate hike last month, traders are not entirely dismissing the MPCs ability to surprise again. In related news, the Sterling edged lower against the Euro on Wednesday, following U.K. industrial output which contracted in December (Actual: -0.1%, Previous: 0.4%R) as mild weather and increased imports dented domestic gas production, though analysts said this was unlikely to affect the outlook for monetary policy.
• The Australian Dollar (AUD) saw the RBA interest rate announcement remain unchanged at 6.25%. The AUD traded within a range of a low 0.7761 and a high of 0.7787 before closing at 0.7780 in the New York session. Looking ahead, Unemployment figures are scheduled for release out of Australia with expectations being that of the previous at 4.6%. UPDATE: Unemployment rate at 4.5%

• Gold (XAU) fell today on the back of oil prices easing. Gold fell by $1.50 an ounce to $657.20

TECHNICAL COMMENTARY

• Euro 1.3020

Initial support at 1.2911 (Feb 6 low) followed by 1.2876 (Jan 26 low). Initial resistance is now located at 1.3036 (76.4% retracement of the 1.3074 to 1.2911 decline) followed by 1.3074 (Feb 2 high)

• Yen 120.65

Initial support is located at 119.96 (Feb 6 low) followed by 119.90 (former resistance from Oct 13, 2006). Initial resistance is now at 121.37 (Feb 2 high) followed by 121.75 (Jan 31 high)

• Pound – 1.9715

Initial support at 1.9588 (Feb 6 low) followed by 1.9536 (Feb 5 low). Initial resistance is now at 1.9751 (61.8% retracement 1.9917 to 1.9482 is Feb 2 high) followed by 1.9833 (Jan 24 high)

• Australian Dollar – 0.7795

Initial support at 0.7715 (Feb 2 corrective low) followed by 0.7697 (50% retracement of 0.7414 – 0.7982 and Jan 31 low). Initial resistance is now at 0.7715 (Feb 2 corrective low) followed by 0.7790 (38.2% retracement of the 0.7940 to 0.7697decline).

• Gold – 653.35

Initial support at 643.50 (Feb 2 low) followed by 641.10 (Jan 26 low). Initial resistance is now at 661.3 (Feb 1 trend high) followed by 676.35 (Jul 17 reaction high)