Australian FOREX Daily Outlook 21/09/2007

Euro all time high of 1.4099, Canadian Dollar at Parity on further USD weakness.

CURRENCY TRADING SUMMARY –21 SEPTEMBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) eased further overnight on ongoing speculation that the Federal Reserve will continue to reduce interest rates, dwindling any demand for the USD. Bearish sentiment was re-iterated with reports circulated that Saudi Arabia will look to cease its peg with the USD due to the recent dollar weakness. In data news, the Conference Board’s index of leading U.S. economic indicators fell 0.6 percent in August, the most in six months. In his address to congress, Bernanke highlighted the Fed’s concern with any repeat in sub-prim mortgage rout, stating “we will use our rulemaking authority” to “propose additional consumer protections later this year”. In U.S share markets the NASDAQ was down 12.19 (-0.46%) whilst the Dow Jones also declined 48.86 (-0.35%). Crude oil fell by US$0.11 a barrel to US$81.67 having traded at a fresh record high of US$83.90.

·The Euro (EUR) reached a fresh record high, breaking through key 1.40 levels in the early part of the European session. The Euro was buoyant against the greenback having gained 6.2% for the year. Overall the EURUSD traded with a low of 1.3964 before and a high of 1.4099 before closing the day at 1.4040 in the New York session. Looking ahead key data is due out of the EZ in the form of Current Account and PMI.

·The Japanese Yen (JPY) gained 1.3% against the USD on speculation the Federal Reserve will continue to reduce rates. Yen buying by Japanese individual investors reached a three-month high of $1.57 billion yesterday, figures from the Tokyo Financial Exchange indicate. Overall the USDJPY traded with a range of a low 115.30 and a high of 116.04 before closing the day at 115.57 in the New York session.

• The Sterling (GBP) paired its previous session losses rebounding well above the $2 levels. The Pound was supported by a report which showed retail sales unexpectedly increased in August, making it less likely the Bank of England will cut interest rates by year end. In other news, BoE Governor Mervyn King today defended policy makers’ actions in the bailout of Northern Rock Plc to a parliamentary committee. King said British and European Union laws “made it almost impossible for us to act as a lender of last resort in the way that I would prefer”. Overall the GBPUSD traded with a low of 1.9974 and a high of 2.0114 and a low of 2.0080 in the New York session.

·The Australian Dollar (AUD) gained over night on a broadly weaker dollar boosted by a demand in commodities. Overall the AUDUSD traded with a low of 0.8553 and a high of 0.8633 before closing the day at 0.8622 in the New York session.

• The Canadian Dollar (CAD) traded equal to the U.S. currency for the first time in three decades, capping a five-year run on the back of booming demand for the nation’s commodities. Parity symbolizes Canada‘s emerging clout in a world economy increasingly short of the energy, grains and metals the country produces. Canada, the world’s eighth-biggest economy, has benefited from rising demand for copper, gold, wheat and oil from neighboring U.S. and emerging economies such as India and China. Overall the USDCAD traded with a low of 0.9992 and a high of 1.0156.

• Gold (XAU) rose to a 27-year high up 2 percent to $735.85 an ounce, it’s highest since January 1980, when it hit a record high of $850. XAU traded with a low of 721.50 and a high of 738.30.

TECHNICAL COMMENTARY

·Euro 1.4075

Initial support at 1.3963 (Sep 20 low) followed by 1.3927 (former resistance Sep 13). Initial resistance is now located at 1.4100 (Sep 20 trend high) followed by 1.4108 (Sep open + Augusts’ range).

·Yen 114.95

Initial support is located at 113.39 (Sep 11 low) followed by 112.61 (Sept 10 low). Initial resistance is now at 116.05 (Sep 20 high) followed by 116.38 (Sep 18 high).

• Pound – 2.0115

Initial support at 1.9952 (Sep 19 low) followed by 1.9880 (Sep 18 low). Initial resistance is now at 2.0174 (September 19 high) followed by 2.0226 (Sep 14 high)

• Australian Dollar – 0.8685

Initial support a 0.8552 (Sep 20 low) followed by 0.8488 (Sep 19 low). Initial resistance is now at 0.8664 (Aug 9 high) followed by 0.8770 (July 27 high).

• Gold – 734.90

Initial support at 720.76 (Sep 18 low) followed by 703.85 (Sep 13 low). Initial resistance is now at 735.00 (Round Number Resistance) followed by 737.40 (This week’s open + last weeks range *1.618)