Australian FOREX Daily Outlook 20/09/2007

CPI and Housing data view for further rate movements. Bernanke to speak today.

CURRENCY TRADING SUMMARY –20 SEPTEMBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) was mixed against a basket of currencies in light of Tuesday’s rate announcement. Adding to further USD weakness were views that the Fed will look to cut interest rates further by year end, in which the benchmark rate is forecasted to sit at 4.5%. In data news, consumer prices unexpectedly declined 0.1 percent last month while housing starts fell to an annualized 1.331 million during August, the lowest in 12 years. The data supported the view the Fed needs to cut borrowing costs further to prevent a recession, amid a housing market collapse and as inflation pressures recede. In U.S. share markets the NASDAQ was up 14.82 points (+0.56) whilst the Dow Jones also rose 76.17 (+0.55%). Crude Oil traded at fresh record highs on Wednesday US$82.51 before ending the session up US$0.42 to close US$81.93 a barrel. Looking ahead, plenty of attention will surround Chairman Bernanke’s testimony to Congress on the state of the Mortgage Market.

·The Euro (EUR) traded just above record highs, yet was not able to break key resistance levels of 1.40 on Wednesday as traders looked to sell the European currency to protect option bets. Overall the EURUSD traded with a range of a low 1.3936 and a high of 1.3988 before closing the day at 1.3961 in the New York session.

·The Japanese Yen (JPY) was range bound against the USD. Following the decision by the bank of Japan to keep rates on hold at 0.5%, traders found further confidence in a carry led market. Overall the USDJPY traded with a range of a low 115.66 and a high of 116.33 before closing the day at 116.07 in the New York session.

• The Sterling (GBP) posted its second biggest decline in a month against the USD as BoE minutes confirmed that all members for holding rates, adding to the view that UK borrowing rates may have peaked at 5.75%. Further more, the GBP traded at a 17 month low against the Euro ensuring speculators fled the Sterling Pound. The U.K. currency was also hurt after the central bank confirmed it will auction 10 billion pounds in a three- month money-market operation and widen the range of collateral it accepts, stoking speculation the credit squeeze may be worse than earlier assumed. Overall the GBPUSD traded with a low of 1.9963 and a high of 2.0172 before closing the day at 2.0012 in the New York session.

·The Australian Dollar (AUD) continued to move on the upside following higher commodity prices. Overall the AUDUSD traded with a range of a low 0.8488 and a high of 0.8570 before closing the day at 0.8559 in the New York session.

·Gold (XAU) eased from its 16 month highs following the Fed rate cut, trading with a low of 721.05 and a high of 726.00.

TECHNICAL COMMENTARY

·Euro 1.3970

Initial support at 1.3825 (Sep 12 low) followed by 1.3765 (Sep 10 low). Initial resistance is now located at 1.3989 (Sep 18 trend high) followed by 1.4000 (Psychological resistance).

·Yen 115.90

Initial support is located at 114.80 (Sep 18 low) followed by 114.11 (Sept 13 low). Initial resistance is now at 116.38 (Sep 18 high) followed by 116.61 (Aug 31 high).

• Pound – 2.0005

Initial support at 1.9880 (Sep 18 low) followed by 1.9821 (76.4% retracement of the 1.9653 to 2.0366 advance). Initial resistance is now at 2.0174 (September 19 high) followed by 2.0226 (Sep 14 high)

• Australian Dollar – 0.8585

Initial support a 0.8276 (Sep 18 low) followed by 0.8238 (Sep 11 low). Initial resistance is now at 0.8570 (Sep 19 high) followed by 0.8592 (0.7640 of 0.8875 – 0.8592).

• Gold – 722.80

Initial support at 712.32 (Sep 18 low) followed by 703.85 (Sep 13 low). Initial resistance is now at 727.15 (Sep 18 high) followed by 730.25 (May 8 high)