Australian FOREX Daily Outlook 09/08/2007

RBA hike rates to an 11 year high of 6.50% as risk appetite returns to the market.

CURRENCY TRADING SUMMARY –09 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) returned to its bearish nature as a basket of majors were able to regain strength vs. the greenback. Factored in, much of the movement was a result of minimal data release out of the U.S. market. Tuesday’s Fed statements’ reluctance to indicate any future rate action as opposed to many other markets being significantly more defined attributed to plenty of short dollar positions. In U.S. share markets the NASDAQ was up by 51.38 points (+2.01%) whilst the Dow Jones was also up a further 153.56 points (+1.14%). Crude oil rose a further US$0.36 a barrel to US$72.42.

• The Euro (EUR) regained some of its strength on Wednesday on the back of a broadly weaker USD. Overall the EURUSD traded with a range of a low 1.3721 and a high 1.3826 before closing the day at 1.3797 in the New York session.

• The Japanese Yen (JPY) fell across the board as investors were eased of concerns regarding a near term rate cut from the Federal Reserve giving the all clear to equity markets and risky carry trades. The Japanese currency also was pressured on the back of a poor reading for June Machinery Orders, casting some doubt on a view that the Bank of Japan is likely to raise rates this month. Overall the USDJPY traded with a low 118.72 and a high of 119.84 before closing the day at 119.69 in the New York session.

• The Sterling (GBP) rallied against the dollar and the Euro on Wednesday as a quarterly inflation report from the BoE signaled interest rates may need to rise one more to help bring inflation down to its 2% target. A return to risk appetite also aided the GBP. Overall the GBPUSD traded with a range of a low 2.0159 and a high of 2.0398 before closing the day at 2.0262 in the New York session. Looking ahead, UK Trade Balance for the month of June is expected to come in at -6.5bln (Previous: -6.29bln)

• The Australian Dollar (AUD) was supported by an interest rate hike of 25 basis points to 6.50% (11 year high) after several months of speculation. Added to its strength was the RBA leaving the door open for further tightening bias in 2008. Overall the AUDUSD traded with a low of 0.8533 and a high of 0.8636 before closing the day at 0.8632 in the New York session. Looking ahead, the Unemployment Rate for the month of July is expected to rise to 4.4% from the previous 4.3%.

• Gold (XAU) fell by US$4.00 an ounce to US$676.30

CURRENCY PAIR IN FOCUS

• The Swiss Franc (CHF) was relatively unchanged on Wednesday as the USD was able to hold onto its gains from the previous session. Overall the USDCHF traded with a range of a low 1.1916 and a high of 1.1996 before closing the day at 1.1958 in the New York session. Looking ahead Swiss consumer confidence will be made public on Thursday.

TECHNICAL COMMENTARY

• Euro 1.3800

Initial support at 1.3720 (Aug 3 low) followed by 1.3683 (Aug 3 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 119.65

Initial support is located at 118.71 (Aug 8 low) followed by 117.97 (Aug 7 low). Initial resistance is now at 119.85 (38.2% retracement of the 124.17 to 117.18 decline) followed by 120.00 (Psychological round number).

• Pound – 2.0375

Initial support at 2.0157 (Aug 8 low) followed by 2.0057 (July 6 low). Initial resistance is now at 2.0407 (50% retracement of the 2.0656 to 2.0157 decline) followed by 2.0465 (61.8% of the 2.0656 to 2.0157 decline)

• Australian Dollar – 0.8630

Initial support a 0.8513 (Aug 7 low) followed by 0.8446 (Aug 1 low). Initial resistance is now at 0.8861 (50% retracement of the 0.8875 to 0.8446 decline) followed by 0.8711 (61.8% retracement of the 0.8875 to 0.8446 decline)

• Gold – 673.60

Initial support at 665.2 (Aug 3 low) followed by 659.4 (Aug 1 low). Initial resistance is now at 676.85 (Aug 8 high) followed by 687.40 (Jul 24 high)