Australian FOREX WeeklyOutlook 22/10/2007

G7 pressures the Chinese Yuan to accelerate. CPI data for Australia and Japan this week.

22/10/07

last week’s currency trading review

The Dollar had relatively mixed data throughout the week yet managed to weaken further across the board, as the G7 meeting loomed. With so much emphasis placed on the Housing sector, Housing Starts recorded it’s lowest level in 14 years, prompting investors to price in further rate cuts out of the Federal Reserve, even as early as Oct 31. The G7 summit failed to address the recent weakness in the USD, with most emphasis being placed on accelerating strength on the Chinese Yuan. The Euro continued to gain in momentum trading at a record high of 1.4317 in the latter part of the week. Much of the moves came on the back of a broadly weaker USD, as the housing downturn continued. The Euro closed last week at 1.4286 having opened at 1.4175. The Japanese was one of the biggest gainers versus the USD, in a highly volatile market. With little data out of Japan, The Yen traded on the back of other currencies, buoyed by the unwinding of carry trades, triggered by a revision lower of global growth, and a plunge in stock prices. The Japanese Yen closed last week at 114.87 having opened at 117.48. The GBP touched fresh high since July reaching 2.0522 on Friday, supported by sturdy reading in GDP and Retail Sales, reducing expectation of near term rate cuts by the BoE. The Pound closed last week at 2.0492 having opened at 2.0343. The AUD was one of the worst performed currencies despite a weaker dollar. In market led by risk aversion, the AUD suffered as a high yielding currency. The Aussie Dollar closed last week at 0.8900 having opened at 0.8971

The forex trading week preview

In the States more housing data is expected this week with both Existing Home Sales (Wednesday) and New Home Sales (Thursday) to take center stage. Durable Goods also appears to be important release on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone PMI data (both services and manufacturing) on Wednesday, whilst the German IFO survey is out on Thursday. In the UK only nationwide house prices on Wednesday proves to be worthy of mention. We will provide our previews and reviews of these data releases in the daily summary.

In Japan CPI data is critical to future monetary policies out of Japan (Thursday) We will provide our previews and reviews of these data releases in the daily summary.

In Australia PPI data out on Monday, as focus will divert to inflationary measure (CPI) on Wednesday. In New Zealand, the RBNZ is scheduled for an interest rate announcement on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

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)