Australian FOREX Daily Outlook 07/08/2007

Unstable Greenback as market grows wary of US economic growth and credit issues.

CURRENCY TRADING SUMMARY –07 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) hit a 15-year low against a basket of major currencies as traders speculate that the worst of the credit issues in the US are not yet over and that soon the Federal Reserve will have to look at cutting rates. The dollar index, a gauge of the greenback’s value against six major currencies slipped to a low below 80 which has not been seen since 1992. The Dow Jones rebounded sharply, however, rising 286pts (2.2%), while the NASDAQ strengthened by 36pts (1.4%). Crude oil took a plunge of 4.5% as the credit problems in the US have many seeing it as affecting economic growth thus demand for oil from the world’s largest consumer. Oil fell by US$3.58 to US$71.17 a barrel. Looking ahead, the FOMC announcement is due out today with the markets expecting the Federal Reserve to keep rates on hold at 5.25%.

• The Euro (EUR) was mixed against the USD as market jitters in the US persisted to start the week. According to European Central Bank Governing Council member Vitor Constancio, the strong Euro has helped cap inflationary pressures due to rising oil prices. Overall, the EURUSD traded with a range of a low 1.3784 and a high of 1.3840 before closing the day at 1.3795 in the New York session.

• The Japanese Yen (JPY) was mixed against the greenback and remained little changed from the previous close in the absence of market moving data from either country. Overall, the USDJPY traded with a range of a low 117.19 and a high of 119.10 before closing the day at 118.91 in the New York session.

• The Sterling (GBP) was weaker as a sharp sell-off occurred once a key technical EUR/GBP level was broken. With UK manufacturing coming in as expected, it failed to provide support for the GBP. Overall, the GBPUSD traded with a range of a low 2.0281 and a high of 2.0460 before closing the day at 2.0303 in the New York session.

• The Australian Dollar (AUD) was slightly stronger as in the absence of any local data, buyers entered the market to move the Aussie to the top end of its recent range. Overall, the AUDUSD traded with a low of 0.8523 and a high of 0.8582 before closing the day at 0.8575 in the New York session. Looking ahead, tomorrow brings us the interest rate announcement from the RBA. General consensus is for a 25bp rise to 6.5%.

• Gold (XAU) fell again by US$1.10 an ounce to US$683.30 as oil took an overnight plunge in the markets.

TECHNICAL COMMENTARY

• Euro 1.3810

Initial support at 1.3683 (Aug 3 low) followed by 1.3637 (Aug 1 low). Initial resistance is now located at 1.3853 (Jul 24 trend high) followed by 1.3941 (This week’s open
+ (last week’s range * 0.618).

• Yen 118.70

Initial support is located at 117.18 (Aug 6 low) followed by 116.37 (Mar 28 low). Initial resistance is now at 119.51 (Jul 31 high) followed by 119.85 (38.2% retracement of the 124.17 to 117.18 decline).

• Pound – 2.0315

Initial support at 2.0180 (Jul 30 low) followed by 2.0134 (July 30 low). Initial resistance is now at 2.0464 (Aug 6 high) followed by 2.0474 (61.8% of the 2.0656 to 2.0180 decline)

• Australian Dollar – 0.8575

Initial support a 0.8491 (Aug 2 low) followed by 0.8435 (61.8% retracement of the 0.8163 to 0.8875 advance). Initial resistance is now at 0.8605 (Aug 2 high) followed by 0.8616 (Jul 31 high)

• Gold – 671

Initial support at 659.4 (Aug 1 low) followed by 657.16 (Jul 27 low). Initial resistance is now at 676.77 (Jul 26 high) followed by 687.40 (Jul 24 high)