Australian FOREX Daily Outlook 18/10/2007

Housing starts fall to its lowest level in 14 years, capping USD gains.

CURRENCY TRADING SUMMARY –18 OCTOBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) paired its previous session gains against a number of majors. In data news, U.S. Core CPI was released on consensus at 0.2%/2.1% whilst headline CPI rose to 0.3% for the m/m (forecast: 0.2%). Housing starts fell to its lowest level in 14 years at 1.191 mln, down -10.2% for the month of September. In U.S. share markets the NASDAQ was up 28.76 points (+1.04%) whilst the Dow Jones was down 20.4 points (-0.15%). Crude oil fell from its previous session record highs, down US$0.22 a barrel to US$87.18. Looking ahead, key data in the form of Philly Fed survey is due out on Thursday.

·The Euro (EUR) rebounded on Wednesday as housing starts in the U.S. caused for markets to price in ongoing rate cuts in the world’s largest economy. Overall the EURUSD traded with a low of 1.4159 and a high of 1.4229 before closing the day at 1.4184 in the New York session. Looking ahead, Trade balance for the month of August will hold more importance than usual, due to recent rhetoric regarding an appreciated currency taking its toll on export prices.

·The Japanese Yen (JPY) initially gained as investors became more risk adverse and repurchased the currency to exit trades financed in Japan, which has the lowest borrowing rate among industrialized nations. The Japanese Yen was able to gain 0.7% versus the AUD and 0.3% against the NZD. The USDJPY traded with a low of 116.18 and a high of 117.20 before closing the day at 116.58 in the New York session.

·The Sterling (GBP) was buoyed by Unemployment Rate holding steady to a 2 ½ year low of 5.4%. The BoE minutes did little to add to any follow through with confirmation of an 8 to 1 vote to hold rates at 5.75%, with Blanchflower being the only member to call for monetary easing. Overall the GBPUSD traded with a low of 2.0289 and a high of 2.0419 before closing the day at 2.0355 in the New York session. Looking ahead, the Retail Sales figures for the month of September with forecast at 0.1%/5.5% for the m/m and y/y respectively.

·The Australian Dollar (AUD) rebounded well on the back of a broadly weaker dollar despite falling on the back of AUDJPY selling in follow through from the previous session. Overall the AUDUSD traded with a low of 0.8818 and a high of 0.8973 before closing the day at 0.8861 in the New York session.

·Gold (XAU) was volatile once again rebounding well amidst earlier profit taking. XAU traded with a low of 752.10 and a high of 764.85 in the New York session.

TECHNICAL COMMENTARY

·Euro 1.4215

Initial support at 1.4158 (Oct 17 low) followed by 1.4102 (61.8% retracement of the 1.4015 and 1.4244 advance). Initial resistance is now located at 1.4230 (Oct 17 high) followed by 1.4244 (Oct 15 trend high)

·Yen 116.45

Initial support is located at 116.18 (Oct 17 low) followed by 115.91 (38.2% retracement of the 112.61 to 117.95advance). Initial resistance is now at 117.19 (Oct 17 high) followed by 117.47 (Oct 16 high).

• Pound – 2.0405

Initial support at 2.0288 (Oct 17 low) followed by 2.0247 (Oct 12 low). Initial resistance is now at 2.0439 (Oct 15 high) followed by 2.0476 (Oct 10 high)

• Australian Dollar – 0.8915

Initial support a 0.8817 (Oct 17 low) followed by 0.8795 (Oct 4 reaction low). Initial resistance is now at 0.8977 (61.8% retracement of the 0.9078 to 0.8814 decline) followed by 0.9013 (Oct 16 high).

• Gold – 760.80

Initial support at 753.75 (Oct 16 low) followed by 748.05 (Oct 15 low). Initial resistance is now at 767.05 (Oct 16 trend high) followed by 770.00 (Round number resistance)