Australian FOREX Daily Outlook 12/02/2007

CURRENCY TRADING SUMMARY –12 FEBRUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) finished the week as plenty of focus surrounded the much anticipated G7 summit in Germany. As a result the USD remained unsteady against all other majors. The results of the G7 summit however were less influential than expected, with much of the pre-hype surrounding the Yen weakness failing to materialize. G7 nations urged investors to recognize Japans economic resurgence was ‘on track’ with officials avoiding statements of any threat to the global economy due to the decline in the Yen in recent weeks. Overall, the G7 summit remained fairly neutral, with ECB Trichet warning of one way bets and the risk involving the unwinding of carry trades. The next G7 summit is scheduled to meet in April in Washington. In US shares market, the NASDAQ closed the week down 28.82 points (-1.16%) whilst the Dow Jones was also done by 56.80 points (-0.45%). Crude oil was up slightly at the end of the week by US$0.04 a barrel to US$59.75.

• The Euro (EUR) surrendered gains made after ECB President Trichet signaled a rate hike was likely in March. Overall, the Euro traded with a range of a low 1.2984 and a high of 1.3045 before closing the day at 1.3005 in the New York session. Furthermore, the G7 summit saw the Eurozone change its position on the weakness of the JPY, with remarks from German Finance minister Steinbrueck, stating the Yen’s weakness is not hurting the European economy.

• The Japanese Yen (JPY) with plenty of concern surrounding the Yen prior to the G7 summit, the Yen extended losses on Friday, for the forth straight session against the EUR and third straight session against the USD, as investors grew more certain that finance officials from the world’s wealthiest nations would not take action against the currencys broad weakness at their meeting over the weekend. As was stated earlier, the Yen weakness was not heavily addressed with officials being neutral on the topic. Overall, the Yen traded within a range of a low 120.99 and a high of 121.75 before closing at 121.65 by the end of the New York session on Friday.
• The Sterling (GBP) fell significantly, reaching 4 week lows against the USD and EUR on Friday following a bigger than expected trade deficit coming in at -7.142 bln worse than the expected -6.9 bln on the back of the BoE decision to keep interest rates unchanged at 5.25%. Overall, the Sterling traded with a low of 1.9459 and a high of 1.9602 before closing at 1.9505 in the New York Session.
• The Australian Dollar (AUD) dropped on Friday trading with a range of a low 0.7754 and a high of 0.7823 before closing at 0.7767 in the New York session. Looking ahead, following the RBA interest rate announcement last Wednesday, accompanying policy statements are set for release today, with markets hoping to gain further insight into future rate decisions.

• Gold (XAU) strengthened on Friday with as a result of high energy prices. Gold rose by US$9.50 an ounce to US$672.30.

TECHNICAL COMMENTARY

• Euro 1.3020

Initial support at 1.2968 (Feb 7 low) followed by 1.2911 (Feb 6 low). Initial resistance is now located at 1.3047 (Feb 9 high) followed by 1.3074 (Feb 2 high)

• Yen 121.90

Initial support is located at 120.99 (Feb 9 low) followed by 120.57 (Feb 8 low). Initial resistance is now at 122.20 (Jan 29 high) followed by 122.38 (61.8% retracement of the 135.18 to 101.67 decline).

• Pound – 1.9535

Initial support at 1.9457 (Feb 9 low) followed by 1.9426 (Jan 12 low). Initial resistance is now at 1.9604 (Feb 9 high) followed by 1.9751 (61.8% of 1.9917-1.9482, 1.9749 is Feb 2 high).

• Australian Dollar – 0.7775

Initial support at 0.7746 (61.8% retracement of the 0.7697 to 0.7826 advance) followed by 0.7715 (Feb 2 corrective low). Initial resistance is now at 0.7826 (Feb 9 high) followed by 0.7847 (61.8% retracement of the 0.7490 to 0.7697decline).

• Gold – 659.70

Initial support at 648.00 (Feb 8 low) followed by 643.50 (Feb 2 low). Initial resistance is now at 668.81 (Feb 9 high) followed by 676.35 (Jul 17 reaction high)