Australian FOREX Daily Outlook 02/02/2007

CURRENCY TRADING SUMMARY –02 FEBRUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) traded in a heavy data-day with the ISM manufacturing coming in weaker-than-expected. With markets forecasting an index of 51.9 the actual figure came in at 49.3 (lowest reading in almost four years, since April 2003), less than the previous 51.4. In other data, Core PCE was released at 2.3%, unchanged form the previous (softer -0.1% month on month than expected). Despite relatively weak data, the Dollar remained steady against most other majors, as investors remained cautious ahead of Unemployment reports scheduled for release and the G7 summit next week. Despite the Dollar reaching three-week lows against many majors following poor manufacturing activity data released earlier, the imminent jobs report insured the USD paired off some of its losses, with investors hopeful of a scope into the Fed future policy regardinginterest rates. In other markets, the NASDAQ rose by 4.45 points (0.18%) and the Dow Jones up 51.99 points (0.41%). Crude oil fell by US$0.71 to US$ 57.44 a barrel. Looking ahead, the release of Key economic data continues to be the trend out of the US with Non-farm Payrolls for the month January being made public. Markets are forecasting a figure of 149K, lower than the previous 167K. This release will attract plenty of attention following the Fed decision to keep interest rates on hold (Wednesday) with suspicions that inflationary pressures are receding. Furthermore, other key data in the form of Unemployment rate is out today with economist predicting an unchanged rate of 4.5%.

• The Euro (EUR) traded steady against the US following investor cautiousness ahead of the payrolls report and G7 summit on the February 9-10. The point of concern for the Eurozone the last week has been the decline in the JPY with several reports suggesting the upcoming G7 will be heavily centered on the issue. However following US Treasury Secretary Henry Paulson statements on Wednesday stating that the Yen was a freely traded currency that was weak for understandable reasons (low interest rates in a country shaking off years of deflation) delivered a blow to Europe objectives.Overall, the Euro traded within a range above the psychological level of 1.3000 reaching lows of 1.3003 and a high of 1.3054 before closing the day at 1.3021 in the New York session. Looking ahead, market will watch the release of the PPI for the month of December out of the Eurozone today. With forecast at 4.10% lower than the previous 4.3%.

• The Japanese Yen (JPY) gained across the board as speculation intensified this week that G7 finance chiefs might discuss yen weakness at next week’s meeting, which could prompt broad buying in the Japanese currency. However, the Eurozone looks likely to receive no support from the US with officials declaring the Japanese currency simply reflected economic fundamentals. The USDJPY traded with a low of 120.10 and a high of 120.92 before closing the day at 120.67 in the New York session.

• The Sterling (GBP) firmed against the USD and EUR on Thursday, aided by strong UK manufacturing sector data that rekindled a debate about the prospect of further Bank of England monetary tightening. PMI manufacturing figures released saw a figure of 52.8 higher than the forecasted 51.7 and previous 52. The GBP traded with a low of 1.9624 and a high of 1.9739 before closing at 1.9675.

• The Australian Dollar (AUD) traded with a low of 0.7736 and a high of 0.7769 before closing the day 0.7738 in the New York session near day lows. Looking ahead, key economic data in the form of the Trade Balance is set for release today with market expectations being a softer number at -1.0 billion worse than the previous -0.843 billion. UPDATE: Australian Trade Balance AU$ -1.336 billion.

• Gold (XAU) continued to rise, up US$ 4.40 an ounce to US$ 662.30 in response to a weaker oil prices.

TECHNICAL COMMENTARY

• Euro 1.3020

Initial support at 1.2925 (Jan 31 low) followed by 1.2876 (Jan 26 low). Initial resistance is now located at 1.3045 (Jan 23 high) followed by 1.3054 (Jan 9 high and 38.2% of 1.3368 to 1.2865)

• Yen 120.75

Initial support is located at 120.10 (Feb 1 low) followed by 119.90 (former resistance from Oct 13, 2006). Initial resistance is now at 120.92 (Feb 2 high) followed by 121.75 (Jan 31 high)

• Pound – 1.9670

Initial support at 1.9621 (Feb 2 low) followed by 1.9482 (Jan 31 corrective low). Initial resistance is now at 1.9737 (Feb 1high) followed by 1.9751 (61.8% retracement 1.9917 to 1.9482)

• Australian Dollar – 0.7735

Initial support at 0.7698 (50% retracement of the 0.7414 -0.7982 rally) followed by 0.7631 (61.8% retracement of the .7414 – 0.7982 rally). Initial resistance is now at 0.7790 (38.2% retracement of the 0.7940 to 0.7697 decline) followed by 0.7821 (Jan 25 high).

• Gold – 655.75

Initial support at 641.10 (Jan 26 low) followed by 639.25 (Jan 24 corrective low). Initial resistance is now at 661.46 (Feb 1 high) followed by 676.35 (Jul 17 reaction high)