Australian FOREX Daily Outlook 10/08/2007

PNB Paribas freeze funds causing plunge in global markets. US stock prices plunge

CURRENCY TRADING SUMMARY –10 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) gained across the board except the Japanese Yen on Thursday as growing market uncertainty further prompted investors to repatriate funds to liquid US dollars. The move was triggered by news stating that France’s largest bank, BNP Paribas temporarily suspended redemptions at three funds worth 1.6b euros. In U.S. share markets, further drops in stock prices saw the NASDAQ fall by 56.49 points (-2.16%) whilst the Dow Jones tumbled by 387.18 (-2.83%). Crude oil fell by US$0.56 a barrel to US$71.59.

• The Euro (EUR) fell 1% against the USD and 2% against the JPY following BNP Paribas Bank freezing funds, with reports suggesting that losses of 700 million in the last two weeks had been seen by the bank. Overall the EURUSD traded with a range of a low 1.3654 and a high of 1.3817 before closing the day at 1.3676 in the New York session.

• The Japanese Yen (JPY) was the only major that gained against the USD overnight as market volatility ensured the Japanese Yen was once again relieved of its carry trade role, as investors bailed out of risky trades financed with Japanese currency after BNP Paribas froze funds with links to the troubled US sub-prime mortgage market. High yielder’s such as the AUD and the NZD fell almost 2% on unwinding, EURJPY cross also fell 2% on Thursday. Overall the USDJPY traded with a range of a low 118.16 and a high of 119.77 before closing the day at 118.26 in the New York session.

• The Sterling (GBP) fell sharply due to carry trade unwinding. Sterling showed little reaction to data showing UK trade deficit narrowed unexpectedly in June to its smallest since October 2005. Overall the GBPUSD traded with a range of a low of 2.0209 and a high of 2.0394 before closing the day at 2.0226 in the New York session.

• The Australian Dollar (AUD) slid sharply on Thursday as one of the high yielder’s on the back of US credit woes taking its toll on European Banks. Earlier in the Asian session a positive reading in Unemployment gave initial support to the AUD, before being sold off in the European session. Overall the AUD traded with a range of a low 0.8485 and a high of 0.8662 before closing the day at 0.8497 in the New York session.

• Gold (XAU) fell more than two percent on Thursday to a one-week low as concerns over liquidity flared in credit markets and central bank gold sales dampened sentiment. Gold fell to a low of US$659.95

CURRENCY PAIR IN FOCUS

• The Swiss Franc (CHF) saw consumer confidence data that was released on Thursday came out lower at 15. Overall the USDCHF traded with a low of 1.1920 and a high of 1.1995 before closing the day at 1.1966 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3660

Initial support at 1.3654 (Aug 9 low) followed by 1.3608 (Jul 30 low). Initial resistance is now located at 1.3819 (Aug 9 high) followed by 1.3853 (Jul 24 trend high).

• Yen 117.85

Initial support is located at 117.18 (Aug 6 low) followed by 117.00 (Round Number). 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 – 2.0210

Initial support at 2.0210 (Aug 9 low) followed by 2.0157 (Aug 8 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 – 0.8470

Initial support a 0.8446 (Aug 1 low) followed by 0.8435 (61.8% retracement of the 0.8163 to 0.8875 advance). Initial resistance is now at 0.8693 (July 16 former low) followed by 0.8711 (61.8% retracement of the 0.8875 to 0.8446 decline)

• Gold – 664.00

Initial support at 657.16 (Jul 6 low) followed by 645.60 (Jul 6 low). Initial resistance is now at 676.85 (Aug 8 high) followed by 687.40 (Jul 24 high)