Australian FOREX Daily Outlook 27/07/2007

Risk Aversion causes unwinding in the carry trade, as Majors ease across the board. US data in GDP and Core PCE, whilst Japan look onto Inflationary figures.

CURRENCY TRADING SUMMARY –27 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) had a second day of rallying on the back of other majors. The dollar steadied following previous session gains moving away from fifteen year lows against a basket of currencies on technical trading, prompting investors to minimize risk exposure. In data specific news, U.S. New Home Sales was released below expectations, indicating ongoing problems in the credit markets. In U.S. share markets the NASDAQ was down -47.51 (-1.79%) whilst the Dow Jones tumbled by -311.5 (-2.26%). Crude oil fell by US$0.93 a barrel to US$74.95 as equity markets eased. Looking ahead, key data out of the U.S. on Friday will include GDP, Core PCE and the Michigan Sentiment Survey.

• The Euro (EUR) ease on the back of weakness against the Japanese Yen, as a drop in the EURJPY cross trickled over to the EURUSD pair. On the data front, the German IFO index was flat providing little support to the Euro. Overall the EURUSD traded with a range of a low 1.3692 and a high of 1.3772 before closing the day at 1.743 in the New York session.

• The Japanese Yen (JPY) was the biggest mover on Thursday as the currency surged climbing to a 3 month low against the greenback on investors exiting carry trades. Overall the USDJPY traded with a range of a low 118.72 and a high of 120.75 before closing the day at 118.81 in the New York session. CPI data out of Japan did little to provide any further support during Friday’s Asian session. Core CPI Nationwide and Tokyo were released at -0.1 on expectations.

• The Australian Dollar (AUD) eased from recent highs, as unwinding of carry trades ensured the Aussie Dollar was one of the worst affected, being a high yielder. Overall the AUDUSD traded with a range of a low 0.8706 and a high of 0.8866 before closing the day at 0.8720 in the New York session. The Kiwi dollar (NZD) fell 2.4% against the Japanese Yen emphasizing the risk aversion of investors. Earlier in the session, The Reserve Bank of New Zealand raised interest rates to 8.25% on Thursday the highest in the industrialized world, but it said that further interest-rate rises may not be needed to curb inflation.

• The Turkish Lira (TRY) Turkey’s lira currency and stocks fell sharply on Thursday, hurt by concerns over potential tensions between the ruling AK Party and the secular establishment over the appointment of a new head of state.Negative U.S. and European markets and concerns about credit markets also knocked Turkish assets, which are sensitive to changes in risk appetite.

• Gold (XAU) fell on Thursday by US$11.00 an ounce to US$662.80 failing maintain it’s attraction safe alternative in volatile markets.

CURRENCY PAIR IN FOCUS

• The Sterling (GBP) eased across the board initiated by soft UK house prices implying that recent rate hikes were beginning to have the desired affect on the housing sector. Nationwide’s home sales survey showed UK house prices rose just 0.1 percent on the month and 9.9 percent on the year, the softest rise since April 2006. The GBP was further pressured on cross Yen selling dropping 500 points on Thursday. Overall the GBPUSD traded with a low of 2.0428 and a high of 2.0562 before closing the day at 2.0490 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3745

Initial support at 1.3662 (July 5 former high) followed by 1.3592 (Jul 10 low). Initial resistance is now located at 1.3853 (Jul 24 trend high) followed by 1.4000 (Psychological round resistance).

• Yen 119.10

Initial support is located at 118.51 (July 26 low) followed by 118.22 (Apr 22 low). Initial resistance is now at 120.77 (Jul 25 high) followed by 121.70 (Jul 23 high)

• Pound – 2.0485

Initial support at 2.0424 (Jul 26 low) followed by 2.0412 (23.6% retracement of the 1.9622 to 2.0656 advance). Initial resistance is now at 2.0656 (Jul 24 trend high) followed by 2.0683 (Intraday Channel Resistance)

• Australian Dollar – 0.8765

Initial support a 0.8705 (Jul 26 low) followed by 0.8653 (Jul 13 low). Initial resistance is now at 0.8875 (Jul 25 trend high) followed by 0.8919 (1.00 progression of 0.8163-0.8749 from 0.8333)

• Gold – 665.80

Initial support at 663.00 (Jul 17 low) followed by 658.90 (Jul 10 low). Initial resistance is now at 676.77 (Jul 26 high) followed by 687.40 (Jul 24 high)