Australian FOREX Daily Outlook 04/10/2007

USD rebounds as markets await payrolls data. BoE and ECB rate announcement today.

CURRENCY TRADING SUMMARY –04 OCTOBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) rebounded across the board as private reports on employment and services suggested the US economy is weathering the housing slump. Both ISM Services and ADP employment were released relatively on consensus, providing further confidence to US economic stability, as speculators trimmed bets against the greenback leading up to non-Farm Payrolls data out on Friday. In U.S. share markets the NASDAQ ended down by -17.68 points (-0.64%) whilst the Dow Jones was also down by -79.26 points (-0.56%). Crude oil fell by US$0.10 a barrel to US$79.95 as supplies had increased by 1.2 million barrels in the last week. Looking ahead, the weekly release of initial jobless claims may hold more importance than usual in anticipation of Friday’s jobs data.

·The Euro (EUR) continued to move away from Monday’s record high of 1.4281 as speculators continued to square bets against the Dollar. Plenty of the moves were triggered by markets anticipation of solid U.S. payrolls data on Friday. Overall the EURUSD traded with a range of a low 1.4087 and a high of 1.4201 before closing the day at 1.4106 in the New York session. Focus now shifts to the ECB’s interest rate announcement with the majority of sentiment surrounding rates being kept on hold.

·The Japanese Yen (JPY) eased to a six week low against the USD following reports that buoyed the greenback, boosting expectations of favorable a reading in Non-farm Payrolls. Overall the USDJPY traded with a low of 115.56 and a high of 116.78 before closing the day at 116.68 in the New York session.

·The Sterling (GBP) also eased considerably against the dollar on supporting US data. Furthermore, traders remained cautious ahead of Thursday’s BoE interest rate announcement. In other news, the Sterling pound showed little reaction to UK services data which revealed the sector had grown at its slowest pace in over a year. Overall the GBPUSD traded with a low of 2.0313 and a high of 2.0442 before closing the day 2.0321 in the New York session. As briefly mentioned, Thursday’s BoE interest rate announcement will hold key importance throughout the day as market remain confident that the borrowing rate will remain at 5.75%, although pockets of the market have priced in a 15% chance that the rate will be cut.

·The Australian Dollar (AUD) fell form yesterday’s levels above 0.8900 on the back of a broadly stronger dollar, despite being boosted by positive Retail Sales data in the Asian session. With analyst forecasting a figure of 0.4%, data surprised on the upside coming in at 0.7% for the month of August, adding to further cause of RBA monetary tightening in months to come. Earlier, the RBA surprised little by keeping rates unchanged at 6.5%. Overall the AUDUSD traded with a low of 0.8809 and a high of 0.8915 before closing the day at 0.8829 in the New York session.

·The South African Rand (ZAR) South African rand and government bonds were steady early on Wednesday and stocks looked set to add to record highs, despite signs of a correction after recent rallies may be near. Local markets have rebounded over the past two weeks, erasing losses suffered amid turmoil sparked by a global credit squeeze. The rand has been boosted by renewed appetite for riskier assets and gold multi-year record levels, as well as recovery in emerging market stocks in general. Overall the USDZAR traded with a low of 6.8800 and a high of 6.9300.

·Gold (XAU) eased in late business on Wednesday as a firmer dollar prompted bullion investors to consolidate gains from the metal’s recent rally to 28-year highs. Gold traded with a low of 726.60 and a high of 736.00.

TECHNICAL COMMENTARY

·Euro 1.4095

Initial support at 1.4062 (Sep 25 low) followed by 1.4043 (Sep 21 low). Initial resistance is now located at 1.4201 (Oct 3 high) followed by 1.4240 (Oct 2 high)

·Yen 116.75

Initial support is located at 115.29 (Oct 2 low) followed by 114.54 (Sept 27 low). Initial resistance is now at 117.13 (Aug 23 high) followed by 117.88 (50% retracement of the 124.15 to 111.61 decline).

• Pound – 2.0320

Initial support at 2.0260 (38.2% retracement of the 1.9880 to 2.0495 advance) followed by 2.0188 (50.0% retracement of the 1.9880 to 2.0495 advance). Initial resistance is now at 2.0444 (Oct 3 high) followed by 2.0495 (Oct 1 high)

• Australian Dollar – 0.8840

Initial support a 0.8808 (Oct 4 low) followed by 0.8786 (Sep 28 low). Initial resistance is now at 0.8952 (Oct 2 trend high) followed by 0.9000 (Psychological round number).

• Gold – 728.70

Initial support at 725.00 (Oct 2 low) followed by 722.70 (Sep 25 low). Initial resistance is now at 747.85 (Oct 1 trend high) followed by 750.00 (Round number resistance)