Australian FOREX Daily Outlook 03/09/2007

Bernanke says Fed ready to, but not inclined to “Act”. Bush reveals plan to stem foreclosures.

CURRENCY TRADING SUMMARY –03 SEPTEMBER 2007 (00:30GMT)

• U.S. Dollar Trading (USD) had mid day rally following admissions by President George W. Bush and Federal Reserve Chairman Ben Bernanke that there would be no bailout of speculators and gave no indication an end to mortgage market turmoil was near, sparking a small safe-haven bid in the dollar. Initially, a plan from the white house to assist in U.S. homeowners coping with the stringent lending conditions sparked some interest as investors questioned further effects on global growth. In what was dubbed his most important speech of his career, Chairman Bernanke also was non-committal to any guidance of future policies in the annual Jackson Hole conference. In his address on “housing and monetary policy”, the chairman confirmed that the Feds were ready to “act” to stem credit woes, in which it was suggested the Central bank was prepared to cut the discount rate further or use additional methods to ease market concerns. Bernanke did however make it very clear that it was not the Federal Reserves role to rescue speculators from their own bad financial decisions. The chairman also added to the view that market uncertainty may rise further in the wake of the credit crunch in a diplomatic publication. In. U.S. share markets the NASDAQ was up at 31.06 points (+1.21%) whilst the Dow Jones also rallied to 119.01 points (+0.9%). Crude oil gained as well on Friday, up by US$0.48 a barrel to US$73.84. Looking ahead, U.S. markets are closed to begin the week with the Labour Day holiday.

• The Euro (EUR) was traded higher before closing lower than the previous session. The Euro lost ground following announcements from President Bush and Chairman Bernanke on Friday. Overall the EURUSD traded with a range of a low 1.3625 and a high of 1.3720 before closing the day at 1.3638 in the New York session. Looking ahead key data out of the EZ will be released in the form of PMI Manufacturing for the month of August with forecast that the figure will be released at 54.2 (Previous: 54.9)

• The Japanese Yen (JPY) consolidated on Friday as markets stabilized from earlier carry trade unwinding. On news that President Bush was to propose a plan in assisting U.S. home owners from defaulting, ensured traders were more confident in rebuilding carry trades. In other news, the Japanese Yen failed to receive any support during the Asian session with a flat reading in key inflationary measures. Overall the USDJPY traded with a range of a low 115.48 and a high of 116.62 before closing the day at 115.96 in the New York session.

• The Sterling (GBP) paired its gains in the later part of the day as Chairman Bernanke speech caused slight risk aversion, which weighed heavy on the highest interest bearing currency of the G7 nations. In the early part of the European session the, the Sterling Pound was able to gain on the back of Gfk Consumer Confidence reports which showed a better than expected release, pushing the pound to two week highs versus the dollar before any further gains were capped.Overall the GBPUD traded with a low 2.0111 and a high of 2.0232 before closing the day at 2.0163 in the New York session.

• The Australian Dollar (AUD) gained during the Asian session following positive data release in Retail Sales and Trade Balance. The AUD rose on economic fundamentals, and as an attractive high yielder, before gains were paired off following Chairman Bernanke speech. Overall the AUDUSD traded with a range of a low 0.8109 and a high of 0.8251 before closing the day at 0.8154 in the New York session.

• Gold (XAU) initially rose on surging equity markets, and a broadly weaker dollar, before any further gains were capped on lack of calmness in the markets. Gold rose by US$8.00 an ounce to US$671.90.

TECHNICAL COMMENTARY

• Euro 1.3635

Initial support at 1.3623 (Aug 31 low) followed by 1.3562 (38.2% retracement of the 1.3360 to 1.3687 advance). Initial resistance is now located at 1.3737 (76.4% retracement of the 1.3853 to 1.3360 decline) followed by 1.3842 (Aug 6 reaction high).

• Yen 115.90

Initial support is located at 115.21 (Aug 30 low) followed by 113.85 (Aug 29 low). Initial resistance is now at 116.75 (Aug 27 high) followed by 117.15 (Aug 23 high and key near-term resistance).

• Pound – 2.0175

Initial support at 2.0110 (Aug 31 low) followed by 2.0044 (Aug 30 low). Initial resistance is now at 2.0235 (Aug 31 high) followed by 2.0272 (61.8% retracement of the 2.0656 to 1.9652 decline)

• Australian Dollar – 0.8185

Initial support a 0.8106 (Aug 31 low) followed by 0.8051 (Aug 29 low). Initial resistance is now at 0.8253 (Aug 31 high) followed by 0.8288 (Aug 28 high)

• Gold – 673.50

Initial support at 661.70 (Aug 29 low) followed by 657.70 (Aug 24 low). Initial resistance is now at 674.75 (Aug 31 high) followed by 676.80 (Aug 8 high)