Australian FOREX Daily Outlook 04/07/2007

Rebound for the USD on profit taking ahead of July 4. RBA expected to keep rates on hold. BoE and ECB rate announcements nearing.

CURRENCY TRADING SUMMARY –04 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) rebounded on Wednesday, following two previous sessions of sharp declines. Although some reprieve was seen, the USD traded near multi year lows against a basket of currencies. On the data front, further poor economic figures were once again released in the form of Pending Home Sales which slumped sharply in May to its lowest level since September 2001, further weighing heavy on the housing sector. In U.S. share markets the NASDAQ was up 12.65 points (+0.48%) whilst the Dow Jones was also up 42.58 points (+0.31%). Crude oil rose by US$0.32 a barrel to US$71.41 as recent attempted bombings in the UK have kept investors cautious of future terrorist attacks. Looking ahead, U.S. markets will be closed on Wednesday for the July 4th holidays.

• The Euro (EUR) eased on Wednesday, yet traded near record highs against the USD as investors eyed central bank meetings this week in Europe which could keep overseas yields climbing. The European Central Bank meets Thursday, and is expected to keep rates on hold, but signal further monetary tightening is ahead. Overall the EURUSD traded with a range of a low 1.3584 and a high of 1.3635 before closing the day at 1.3617 in the New York session. Looking ahead, key data will be released in the form of Retail Sales sure to be a point of interest with forecasts at 0.0% for the month of May (Prior: 0.2%). In other data, Services PMI for the month of June will also be made public with expectations that the figure will be released at 58.3 (Prior: 57.3)

• The Japanese Yen (JPY) was steady on Wednesday ending the day relatively unchanged. Overall, the USDJPY traded with a low of 122.13 and a high of 122.69 before closing the day at 122.39 in the New York session.

• The Sterling (GBP) came within sight of 2.0200 levels as investors await a widely expected BoE rate hike this week. The GBPUSD traded with a range of a low 2.0133 and a high of 2.0195 before closing the day at 2.0172 in the New York session. In data news, Services PMI for the month of June will be released out of the UK with economists awaiting a release of 57, slightly down from the previous 57.2. It should also be mentioned that the BoE will begin its two day MPC meeting on Wednesday.

• The Australian Dollar (AUD) eased in the early part of the Asian session as poor Retail Sales prompted investors to square off profits ahead of an RBA announcement on Wednesday. Retail Sales for the month of May came in well below expectations of 0.7%, with the actual figure at -0.1%. Overall the AUD traded with a range of a low 0.8540 and a high of 0.8596 before closing the day at 0.8542 in the New York session. Looking ahead a heavy data day is expected out of the Australian markets, as the RBA is widely expected to keep rates on hold 6.25%. In other data, Trade balance is expected to widen form the previous month, slipping from the previous -962 mio, down to -1200 mio. UPDATE: RBA cash target at 6.25% (unchanged)

• The South African Rand (ZAR) largely held onto the previous day’s gains against the greenback seen on Tuesday, yet is unlikely to strengthen further this week, with the central bank seen buying dollars off the market. The rand was just 0.24 percent off its New York close of 6.9550 on Monday, when it rose to six-week highs, mainly reflecting the dollar’s fall against the Euro, the currency of South Africa‘s main trading partner

• Gold (XAU) fell by US$3.80 an ounce to US$655.40 with profit taking ahead of the July 4 holidays.

CURRENCY OF THE WEEK

• CAD/JPY eased slightly from recent highs which were driven by merger related buying of Canadian dollar and firm commodity prices. The Canadian dollar is generally benefiting from higher oil and metal prices, while Japanese yen weakens on ongoing carry trading, bringing CADJPY to new record highs. Overall, the CADJPY traded with a range of a low 115.01 and a high of 116.32

TECHNICAL COMMENTARY

• Euro 1.3615

Initial support at 1.3527 (June 2 low) followed by 1.3414 (Jun 27 low). Initial resistance is now located at 1.3641 (Jul 2 high) followed by 1.3683 (Apr 27 trend high)

• Yen 122.45

Initial support is located at 122.09 (Jul 2 low) followed by 121.49 (Jun 13 low). Initial resistance is now at 123.56 (Jun 29 reaction high) followed by 124.17 (Jun 22 trend high)

• Pound – 2.0165

Initial support at 2.0070 (Jul 2 low) followed by 1.9974 (Jun 28 low). Initial resistance is now at 2.0220 (Former support Mar 1979) followed by 2.0244 (Tues open + (Mon range *0.618)

• Australian Dollar – 0.8550

Initial support a 0.8460 (June 29 low) followed by 0.8354 (Jun 27 low). Initial resistance is now at 0.8602 (Jul 2 trend high) followed by 0.8700 (Round Number)

• Gold – 654.20

Initial support at 648.85 (Jul 2 low) followed by 640.00 (Jun 26 low). Initial resistance is now at 658.75 (July 2 high) followed by 662.35 (61.8% retracement 674.00 to 643.50 decline)