Australian FOREX Daily Outlook 05/09/2007

US equity prices post strong gains as Manufacturing still in growth. RBA hold rates.

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

• U.S. Dollar Trading (USD) gained across the board as equity prices firmed, despite ISM manufacturing indicated slowing activity for the month of August, coming in at 52.9 (Forecast: 53.0). In U.S. share markets the NASDAQ was up 33.88 points (+1.30%), whilst the Dow Jones was also up 91.12 points (+0.66%). Crude oil was also able to rise to despite a broadly stronger dollar, up US$1.04 to US$75.08 a barrel.

• The Euro (EUR) eased against the USD, weighed heavy by further fallouts from German banks in wake of the sub prime issues. That has injected uncertainty into the path of Euro zone interest rates, scheduled on Thursday. Overall the EURUSD traded with a range of a low 1.3552 and a high of 1.3626 before closing the day at 1.3614 in the New York session.

• The Japanese Yen (JPY) fell against higher yielder as U.S. The yen earlier pushed higher as a decline in European stocks reflected investors unwinding of risky carry trades that use cheaply borrowed yen to buy higher-yielding currencies. Overall the USDJPY traded with a range of a low 115.33 and a high of 116.43 before closing the day at 116.20 in the stocks showed some recovery. New York session.

• The Sterling (GBP) weakened on Tuesday, most notably against the dollar, which got a boost after U.S. manufacturing data suggested recent financial market turmoil may not be having as negative an impact on the U.S. economy as some had feared. The pound had suffered earlier in the day from unwinding of carry trades. The market turbulence has prompted many investors to look for the Bank of England to hold interest rates at 5.75 percent on Thursday after five hikes since August last year, despite economic activity keeping up a strong pace of growth last month. Overall the GBPUSD traded with a low 2.0076 and a high 2.0195 before closing the day at 2.0146 in the New York session.

• The Australian Dollar (AUD) was boosted during the Asian session with a stronger than expected reading in GDP for the second quarter. Overall the AUDUSD traded with a low of 0.8201 and a high of 0.8237 before closing the day at 0.8203 in the New York session. Following there two day meeting, the RBA surprised little by holding rates at 6.5% on Wednesday morning.

• Gold (XAU) rose by US$9.60 an ounce US$681.20.

TECHNICAL COMMENTARY

• Euro 1.3620

Initial support at 1.3593 (Aug 30 low) followed by 1.3562 (38.2% retracement of the 1.3360 to 1.3687 advance). Initial resistance is now located at 1.3719 (Aug 31 high) followed by 1.3842 (Aug 6 reaction high).

• Yen 116.25

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 – 2.0150

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 – 0.8275

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 – 681.60

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)