Australian FOREX Daily Outlook 12/10/2007

BoJ keep rates on hold as ECB warns on inflation. Aussie Unemployment rate at 33 year lows of 4.2%

CURRENCY TRADING SUMMARY –12 OCTOBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) eased against a number of majors in an overall mixed session. In data news, U.S. trade deficit narrowed to -57.6bln in August, to touch the lowest level since January, as exports rose by 0.4% (138.3 bln), whilst import fell by the same figure (to 195.9 bln). In U.S. share markets the NASDAQ was down -39.41 (-1.40%) whilst the Dow Jones was also down was also down by -63.57 (-0.45%). Crude oil rose by US$1.80 a barrel to US$83.10. Looking ahead, Friday ends a heavy data week for the U.S. with PPI, Retail Sales and Michigan Sentiment Survey sure to attract plenty of attention from investors, in measuring the state of the economy.

·The Euro (EUR) was at its strongest level against the Yen since July as Fed officials indicated that borrowing costs may need to be increased in order to keep inflationary pressure under control. The Euro gained for a third day against the dollar as ECB President Jean-Claude Trichet said economic expansion remains “robust” and “dynamic”. Overall the EURUSD traded with a range of a low 1.4135 and high of 1.4241 before closing the day at 1.4183 in the New York session. Friday’s release of industrial production is the only key release out of the Eurozone.

·The Japanese Yen (JPY) saw the BoJ keep rates unchanged at 0.5%, leaving it at the lowest level of all the industrialized nations. With an 8 to 1 vote, the JPY remained pressured, sustaining it role as a funding currency for the popular carry trade. The monthly report released by the BoJ was relatively unchanged as the economy is expected to expand moderately. In his press release, Governor Fukui noted “the impact of sub-prime turmoil in the US on global growth has been limited” although “uncertainties remain”. Hawkish comments followed from the central bank head on inflation, indicating that upward pressures to prices are gradually increasing. Overall the USDJPY traded with a low of 117.06 and a high of 117.79 before closing the day at 117.09 in the New York session.

·The Sterling (GBP) fell after a survey showed U.K. house prices dropped at the fastest pace since September 2005 last month, reinforcing the case for monetary easing. Further weakness on the GBP was seen on reports that the U.K. Treasury had extended a loan facility to Northern Rock Plc, the fourth larges mortgage lender which was bailed out by the central bank last month. Overall the GBPUSD traded with a range of a low 2.0323 and a high of 2.0425 before closing the day at 2.0315 in the New York session

·The Australian Dollar (AUD) traded through key resistance levels and above 90 cents once again buoyed by a decline in Unemployment Rate, in which it now sits at a 33 year low of 4.2%. Overall the UADUSD traded with a range of a low 0.8967 and a high of 0.9060 before closing the day at 0.8999 in the New York session.

·Gold (XAU) rose to the highest price since 1980 as a decline in the value of the dollar boosted the appeal of the precious metal as an alternative investment. XAU traded with a low of 741.00 and a high of 753.60.

TECHNICAL COMMENTARY

·Euro 1.4200

Initial support at 1.4094 (Oct 10 low) followed by 1.4015 (Oct 9 low). Initial resistance is now located at 1.4241 (Oct 11 high) followed by 1.4282 (Oct 1 trend high)

·Yen 117.45

Initial support is located at 117.02 (Oct 11 low) followed by 116.28 (Oct 4 low). Initial resistance is now at 117.79 (Oct 11 high) followed by 117.88 (50% retracement 124.15 to 111.61 decline).

• Pound – 2.0325

Initial support at 2.0311 (Oct 11 low) followed by 2.0257 (Oct 9 low). Initial resistance is now at 2.0495 (Oct 1 high) followed by 2.0562 (Jul 26 high)

• Australian Dollar – 0.9015

Initial support a 0.8941 (Oct 10 low) followed by 0.8914 (Oct 9 low). Initial resistance is now at 0.9059 (Oct 11 trend high) followed by 0.9052 (0.8052 plus 1.618 of 0.7676 – 0.8335).

• Gold – 747.10

Initial support at 740.60 (Oct 11 low) followed by 737.70 (Oct 10 low). Initial resistance is now at 753.95 (Oct 11 high) followed by 758.50 (This week’s open + (last week’s range * 0.618)