Australian FOREX Daily Outlook 02/07/2007

Key Manufacturing data release to begin the week. AUD and GBP break key levels to remain bullish.

CURRENCY TRADING SUMMARY –02 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) mixed data out of the US continued to cloud the greenback. Several economic indicators, including the Core PCE price index, Chicago PMI and consumer sentiment had no impact on the market despite better than expected numbers mainly due to the fact that Fed indicated that it is still concerned about inflation. Yet last weeks neutral statement from the Fed Reserve strengthened the markets view that rates will be on hold for some time. In US share markets, the NASDAQ fell by -5.14 points, whilst the Dow Jones also fell by 13.66 points. Crude Oil rose to fresh 10 month highs, jumping by US$1.11 a barrel to US$70.68. Looking ahead, key data will be released out of the US in the form of Manufacturing ISM, with markets expecting a relatively flat figure of 55.0

• The Euro (EUR) climbed against the USD. Overall the EURUSD traded with a range of a low 1.3431 and a high of 1.3541 before closing the day at 1.3534 in the New York session. Looking ahead key data in the form of Manufacturing PMI will be released from the EZ, as with expectations of a flat 55.4 for the month of June.

• The Japanese Yen (JPY) fell more than 0.3 % on Friday against the USD, with the low-yielding JPY weakening across the board as investors’ appetite for risk returned. Overall the USDJPY traded with a range of a low 122.99 and a high of 123.56 before closing the day at 123.04 in the New York session. Looking ahead, Quarter 2 Tankan Survey is sure to generate plenty of interest with economist expected a flat figure of 23 (same as previous). UPDATE: Tankan at 23

• The Sterling (GBP) hit a near five-month high against a trade-weighted basket of currencies on Friday, supported by expectations of a BoE interest rate rise next week and at least one more hike by year-end. Overall the GBPUSD traded with arrange of a low 2.013 and a high of 2.0085 before closing the day at 2.0075 in the New York session. Looking ahead the Manufacturing PMI will be released out of the UK with expectations the figure will come in a little softer at 54.5 than the previous 54.9

• The Australian Dollar (AUD) broke key levels late on Friday as investors continue to source the high yielding currency. Overall the AUD USD traded with a range of a low 0.8464 and a high of 0.8520 before closing the day at 0.8481 in the New York session.

CURRENCY OF THE WEEK

• The Canadian Dollar (CAD) fell sharply on Friday, retreating from a 30-year high against the USD, after data showed that Canada Gross Domestic product grew at a slower than expected pace in April. It was the first time since June 2006 that GDP did not grow according to Statistics Canada. Despite the fact that economic growth stalled unexpectedly in April, analysts believe that this will not prevent the Bank of Canada from raising interest rates early this month for the first time in more than a year, as warnings of inflationary pressure continue to flash. The Bank of Canada is expected to raise its key overnight rates on July 10 by 25bps to 4.5%, and some believe another hike is a possibility for September. Overall the USDCAD traded with a range of a low 1.0475 and a high of 1.0657 before closing the day at 1.0631 in the New York session.

• Gold (XAU) rose by US$0.50 an ounce to US$650.90.

TECHNICAL COMMENTARY

• Euro 1.3535

Initial support at 1.3414 (June 27 low) followed by 1.3371 (Jun 21 low). Initial resistance is now located at 1.3548 (Jul 2 high) followed by 1.3556 (June 5 high)

• Yen 123.00

Initial support is located at 122.22 (June 27 low) followed by 122.00 (Round number). Initial resistance is now at 123.71 (76.4% retracement of the 124.17 to 122.22 decline) followed by 125.00 (Psychological round number)

• Pound – 2.0085

Initial support at 1.9974 (June 28 low) followed by 1.9929 (Jun 27 low). Initial resistance is now at 2.0134 (Apr 18 multi-year high) followed by 2.0220 (Mar 1979 high)

• Australian Dollar – 0.8515

Initial support a 0.8354 (June 27 low) followed by 0.8333 (Jun 14 low). Initial resistance is now at 0.8514 (Jun 26 trend high) followed by 0.8558 (Jan 1989 former low)

• Gold – 649.60

Initial support at 640.00 (June 26 low) followed by 637.36 (Mar 14 low). Initial resistance is now at 662.35 (61.8% retracement 674.00 to 643.50 decline) followed by 674.0 (June 4 high)