Australian FOREX Daily Outlook 22/10/2007

G7 fails to address the weak Dollar, instead concerned with the Yuan.

CURRENCY TRADING SUMMARY –22 OCTOBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) was subject to extensive volatility to end the week. With plenty of emphasis placed on the G7 summit and the expected focal point of recent USD weakness, with traders looking to minimize there exposure ahead of the meeting. Although there was no specific discussion of the majors, especially the USD, with more emphasis being placed on the Chinese Yuan and the acceleration of its strength, with officials in agreement that if the currency remaining undervalued, it will continue to threaten their trade balance. In U.S. share markets the NASDAQ was down 74.15 points (-2.65%) whilst the Dow Jones tumbled 366.94 points (-2.64%). Crude oil traded at fresh record highs of US$88.87, on Friday before ending the session at down US$0.70 to US$87.90 a barrel.

·The Euro (EUR) traded in a choppy session ahead of the G7 summit, where it was viewed that much of the discussion will surround record highs between the currency pair. Overall the EURUSD traded with a low of 1.4197 and a high of 1.4311 before closing the day at 1.4293in the New York session.

·The Japanese Yen (JPY) surged across the board ahead of the G7 summit, as a plunge in stock prices prompted investors to unwind their carry trades. The Yen also continued it five day long gain against the USD where it was assumed that Policy makers at the Group of Seven meeting in Washington may press China and Japan to let their currencies strengthen. Overall the USDJPY traded with a range of a low 115.28 and a high of 116.70 before closing the day at 116.65 in the New York session.

·The Sterling (GBP) continued its weekly gain after a government report showed the U.K. economy grew faster than forecast in the third quarter, reducing the scope for the Bank of England to lower interest rates. A robust reading in GDP for third quarter came in at 0.8%, with markets having expected 0.7%. Overall the GBPUSD traded with low of 2.0385 and a high of 2.0514 before closing the day at 2.0448 in the New York session.

·The Australian Dollar (AUD) eased as traders squared carry trade positions ahead of the G7 meeting. 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. PPI data for the third quarter was better thane forecasted at 1.1%.

·Gold (XAU) rose to record high of 770.90 an ounce on a broadly weaker dollar. XAU traded with a low of 758.70 and a high 770.90.

TECHNICAL COMMENTARY

·Euro 1.4330

Initial support at 1.4203 (38.2% retracement of the 1.4015 to 1.4319 advance) followed by 1.4131 (61.8% retracement of the 1.4015 to 1.4319 advance). Initial resistance is now located at 1.4319 (Oct 19 trend high) followed by 1.4369 (1.0410 plus 1.3360 – 1.3719)

·Yen 113.75

Initial support is located at 114.65 (61.8% ret of 112.61 to 117.95 adv) followed by 113.67 (76.4% retracement of the 112.61 to 117.95 advance). Initial resistance is now at 115.72 (Oct 19 high) followed by 116.64 (Oct 18 high).

• Pound – 2.0500

Initial support at 2.0384 (Oct 18 low) followed by 2.0288 (Oct 17 low). Initial resistance is now at 2.0525 (Oct 19 high) followed by 2.0562 (Jul 26 high)

• Australian Dollar – 0.8860

Initial support a 0.8817 (Oct 17 low) followed by 0.8795 (Oct 4 reaction low). Initial resistance is now at 0.8994 (Oct 19 high) followed by 0.9013 (Oct 16 high).

• Gold – 757.40

Initial support at 752.05 (Oct 17 low) followed by 748.05 (Oct 15 low). Initial resistance is now at 771.50 (Oct 19 trend high) followed by 774.90 (This weeks open + (last weeks range * 0.618)