Australian FOREX Daily Outlook 19/10/2007

Euro trades at record high of 1.4311 ahead of G7 meeting.

CURRENCY TRADING SUMMARY –19 OCTOBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) fell against a number of currencies on Thursday as the U.S. second largest bank, Bank of America Corp., said trading losses, defaults and write downs had cost about $4 billion in the third quarter. Investors interpreted the reports as though the Federal Reserve would look to cut interest rates once again, pushing the greenback down to record lows. Following Wednesday’s poor reading in Housing Starts (14 year low), Traders increased bets that the FOMC would ease borrowing rates on Oct 31. In other news, the Philly fed survey declined by -6.8 for the month of October, below forecasts of 7.3 and a decline from the previous 10.9. In U.S. share markets the NASDAQ was up 6.64 points (+0.24%) whilst the Dow Jones was down 3.58 points (-0.03%). Crude oil surged to fresh record highs on a broadly weaker dollar and as geopolitical tensions continued to mount, pushing higher by US$2.15 a barrel to US$89.55. Looking ahead, the much anticipated G7 summit begins today in Washington.

·The Euro (EUR) rose to a fresh record high on Thursday, as markets remain confident that the Federal Reserve remains on a monetary loosening cycle. Overall the EURUSD traded with a low of 1.4197 and an all time high of 1.4311 before closing the day ahead at 1.4293 in the New York session.

·The Japanese Yen (JPY) was relieved of further carry trade funding as traders looked to flat stock prices. Overall the USDJPY traded with a range of a low 115.28 and a high of116.70 before closing the day at 116.65 in the New York session.

·The Sterling (GBP) was buoyed by a positive reading in retail sales for the month September, with the figure released at 0.6% for the m/m (Forecast: 0.1%), with the year on year figure reaching its highest level in three years of 6.3%. However any further gains against the USD were limited, as the Pound fell versus the Euro. Overall the GBPUSD traded with a low of 2.0511 and a high of 2.0385 in the New York session. Looking ahead, GDP for the third quarter is set for release on Friday, as markets await figures of 0.7%/3.1% (Previous: 0.8%/3.1%) for the q/q and y/y respectively.

·The Australian Dollar (AUD) was volatile for much of the session trading in a 110 pip range. Overall the AUDUSD traded with a low of 0.8882 and a high of 0.8973 before closing the day at 0.8959 in the New York session.

·Gold (XAU) was in demand as the USD fell to record lows versus the Euro, prompting traders to look for alternative investments. XAU traded higher, up US$6.40 an ounce to US$768.70.

TECHNICAL COMMENTARY

·Euro 1.4285

Initial support at 1.4197 (Oct 18 low) followed by 1.4144 (Oct 16 low). Initial resistance is now located at 1.4311 (Oct 18 trend high) followed by 1.4315 (This week’s open + (last week’s range * 0.618)

·Yen 115.30

Initial support is located at 115.28 (Oct 18 low) followed by 114.65 (61.8% retracement of the 112.61 to 117.95 advance). Initial resistance is now at 116.64 (Oct 18 high) followed by 117.19 (Oct 17 high).

• Pound – 2.0445

Initial support at 2.0384 (Oct 18 low) followed by 2.0288 (Oct 17 low). Initial resistance is now at 2.0514 (Oct 18 high) followed by 2.0562 (Jul 26 high)

• Australian Dollar – 0.8935

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 – 768.80

Initial support at 752.05 (Oct 17 low) followed by 748.05 (Oct 15 low). Initial resistance is now at 769.0 (Oct 18 trend high) followed by 770.00 (Round number resistance)