Australian FOREX Daily Outlook 03/10/2007

US Housing concerns continue to surround markets. G7 summit looming

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

·U.S. Dollar Trading (USD) rebounded against a basket of currencies overnight as speculators trimmed bets against the USD ahead of key data releases later on this week. Plenty of skepticism surrounds the G7 meeting later this month in which policy makers maybe wary of a weaker dollar being key topic of discussion. In data news, Pending Home Sales dropped more than expected, down by -6.5% (Forecasts: -2.1% Prior: -12.2%). In U.S share markets the NASDAQ was up 6.12 points (+0.22%) whilst the Dow Jones was down -40.24 points (-0.29%). Crude oil eased slightly by US$0.19 a barrel to US$80.05. Looking ahead, Services ISM proves to be the key data release out of the US today in which forecasts lie at 55.0 for the month of September slightly down from the previous 55.8.

·The Euro (EUR) fell against the USD following verbal intervention from European officials, primarily concerned with an expensive Euro beginning to take its toll on export prices. In data specific news, the Euro zone PPI rose 1.7% y/y down from the previous 1.8%, confirming it lowest reading in three years. Unemployment rate came in as expected at 6.9%. Overall the EURUSD traded with a low of 1.4139 and a high of 1.4238 before closing the day at 1.4155 in the New York session. Looking ahead, Wednesday sees the release of PMI Services (Forecast: 54 Prior: 58) and Retail Sales (Forecast: 0.4% Prior: 0.1%) for the month of September and August respectively.

·The Japanese Yen (JPY) tested key 116.00 levels trading in a defined 70 pip range for much of the session. Overall the USDJPY traded with a low of 115.29 and a high of 115.99 before closing the day at 115.85 in the New York session.

·The Sterling (GBP) reached a two week high against a basket of currencies following reports of a 740 million pound rescue package for troubled mortgage lender Northern Rock, reinstating confidence in the UK’s financial section. Overall the GBPUSD traded with a 2.0371 and a high of 2.0446 before closing the day at 2.0416 in the New York session. Looking ahead, data out of the UK includes PMI services with forecast for the month of September at 56.8.

·The Australian Dollar (AUD) failed to sustain key levels above 89 cents on Tuesday as investors squared off long AUD positions for profit taking. Overall the AUDUSD traded with a low of 0.8808 and a high of 0.8949 before closing the day at 0.8854 in the New York session. Earlier the RBA surprised little in the market by keeping rates unchanged at 6.5% on Wednesday morning, whilst focus now shifts to Retail Sales and Trade Balance data for the month of August. UPDATE: Retail Sales at 0.7%, Trade Balance -1614 mln.

·The South African Rand (ZAR) South African banks helped stocks to a new all-time closing high on Tuesday as a more dovish interest rate view swept the market, while the rand sank over one percent against a firmer dollar. The USDZAR traded with a low of 6.8305 and a high of 6.9435.

·Gold (XAU) eased by almost 2.5% by the end of the session, as profit taking surrounded the market. XAU traded with a low 724.95 and a high of 747.05.