Australian FOREX Daily Outlook 15/10/2007

Positive Retail Sales gives further cause for carry trades as UK house prices slump.

CURRENCY TRADING SUMMARY –15 OCTOBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) was mixed against a number of currencies buoyed by positive Core Retail Sales figures for the month September coming in at 0.4% (forecast: 0.3%), dousing claims that the U.S. economy would be heading into a recession in the near term. In other data news, Producer Prices also added to further confidence in the market coming in at 1.1% for the month of September, well above the estimated 0.4%. Yet any added gains were soon capped with Michigan Sentiment survey showing a decline in consumer confidence for the month of October, down from the previous 83.4 to 82 (Forecast: 84). In U.S. share markets, the NASDAQ was up 33.48 points (1.21%) whilst the Dow Jones also gained by 77.96 points (0.56%). Crude oil continued to gain to end the week up a further US$0.69 a barrel to US$83.77. Looking ahead, Empire State manufacturing index, with forecast at 12.5% down on the previous 14.7%.

·The Euro (EUR) was relatively unchanged to end the week, trading sideways for much of the session. Overall the EURUSD traded with a range of a low 1.4155 and a high of 1.4213 before closing the day at 1.1473 in the New York session.

·The Japanese Yen (JPY) eased against the USD on Friday as US retail sales gave further confidence as consumers continue to spend despite a weak housing sector. USDJPY traded with a low 117.15 and a high 117.69 before closing the day at 117.59 in the New York session.

·The Sterling (GBP) was amidst growing expectations that the BoE will cut interest rates to support the economy during the global credit squeeze. The Sterling fell against the USD, as reports suggested that house prices had dropped at its most in two years. Overall the GBPUSD traded with a range of a low 2.0249 and a high of 2.0365 before closing the day at 2.0344 in the New York session.

·The Australian Dollar (AUD) was one of the best performing majors against the USD as positive retail sales was gave confidence to carry trade positions supportive of the AUD. Overall the AUDUSD traded with a low of 0.8953 and a high of 0.9053 before closing the day at 0.9032 in the New York session.

·Gold (XAU) fell after a gain in the value of the U.S. dollar reduced the appeal of the precious metals as alternative investments. XAU traded with a low of 745.50 and a high of 752.10

TECHNICAL COMMENTARY

·Euro 1.4170

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 117.70

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 – 2.0335

Initial support at 2.0247 (Oct 12 low) followed by 2.0188 (50% retracement of the 1.9880 to 2.0495 advance). Initial resistance is now at 2.0366 (Oct 12 high) followed by 2.0423 (Oct 11 high)

• Australian Dollar – 0.9045

Initial support a 0.8953 (Oct 12 low) followed by 0.8914 (Oct 9 low). Initial resistance is now at 0.9059 (Oct 11 trend high) followed by 0.9118 (0.8052 plus 1.618 of 0.7676 – 0.8335).

• Gold – 749.30

nitial support at 741.40 (Oct 11 low) followed by 737.70 (Oct 10 low). Initial resistance is now at 753.70 (Oct 11 trend high) followed by 758.50 (This week’s open + (last week’s range * 0.618)