Australian FOREX Daily Outlook 28/08/2007

Trichet reneges on his “vigilance” placing doubt on rate hikes in a volatile market.

CURRENCY TRADING SUMMARY –28 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) rebounded on Tuesday across the board, as investors focused on maintaining exposure to the risky assets at a minimum with ongoing fears regarding the credit market woes. In data news, existing home sales came in better than expected yet did little to ease market concerns due to its July period. In U.S. share markets the NASDAQ was down 15.44 points (-0.6%) whilst the Dow Jones was also down by 56.74 points (-0.42%). Crude oil rose by US$0.88 a barrel to US$71.97.

• The Euro (EUR) lost ground on Monday, following ECB President Trichet added further uncertainty to the FX markets, admitting to his recent hawkish statements on the 2^nd of August were before a time of market volatility. Overall the EURUSD traded with a range of a low 1.3535 and a high of 1.3685 before closing the day at 1.3650 in the New York session. Looking ahead, key data out of the EZ on Tuesday will be released in the form of the German IFO with expectations the index will be down on the previous 106.4 to 105.4.

• The Japanese Yen (JPY) gained by 0.3% against the USD, as jitters returned to the market regarding the credit crisis. Much of the moves, were triggered by drop in stock prices in which investors have used as a gauge for appetite risk. Overall the USDJPY traded with a range of a low 115.89 and a high of 116.76 before closing the day at 116.12 in the New York session.

• The Sterling (GBP) eased on the back of a broadly stronger dollar. Otherwise the GBP traded in a technical range, before drops in equity prices ensured that the USD was reprieved on risk aversion. Overall, the GBPUSD traded with a range of a low 2.0122 and a high of 2.0192 before closing the day at 2.0133 in the New York session.

• The Australian Dollar (AUD) traded on the back of other majors, gaining throughout the session, before a slight unwind in the carry trade ensured the AUD paired most of the gains. Overall the AUDUSD traded with a low of 0.8274 and a high of 0.8334 before closing the day in the New York session at 0.8302.

• Gold (XAU) fell slightly in quiet trading session for the yellow metal compared to its previous session rally. XAU traded with a low of 666.02 and a high of 668.35

CURRENCY PAIR IN FOCUS

• EURJPY the popular high yielder eased on Monday with jitters in the market resurfacing following a dovish admission by ECB President Trichet and drop in equity prices ensured the cross was sold off. Overall the EURJPY traded with a range of a low 158.11 and a high of 159.68 before closing the day at 158.50 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3640

Initial support at 1.3534 (Aug 23 low) followed by 1.3449 (Aug 22 low). Initial resistance is now located at 1.3685 (Aug 27 high) followed by 1.3711 (Aug 13 high).

• Yen 115.65

Initial support is located at 115.29 (Aug 23 low) followed by 113.67 (Aug 20 low). Initial resistance is now at 117.15 (Aug 23 high) followed by 117.89 (50.0% retracement of the 124.17 to 111.60 decline).

• Pound – 2.0095

Initial support at 1.9978 (Aug 24 low) followed by 1.9915 (Aug 23 low). Initial resistance is now at 2.0195 (Aug 27 high) followed by 2.0272 (61.8% retracement of the 2.0656 to 1.9652 decline)

• Australian Dollar – 0.8255

Initial support a 0.8154 (Aug 24 low) followed by 0.8064 (Aug 23 low). Initial resistance is now at 0.8350 (Aug 15 high) followed by 0.8431 (76.4% retracement of the 0.8665 to 0.7674 decline)

• Gold – 666.80

Initial support at 657.70 (Aug 24 low) followed by 653.70 (Aug 20 low). Initial resistance is now at 668.80 (Aug 24 high) followed by 676.80 (Aug 8 high)