Australian FOREX Daily Outlook 06/06/2007

USD tumbles across the board as housing sector weighs heavy. AUD reaches 17 year high in scope of RBA announcement and GDP release.

CURRENCY TRADING SUMMARY –06 JUNE 2007 (00:30GMT)

• U.S. Dollar Trading (USD) continued to dip below key support levels as comments made by Federal Reserve Chairman Bernanke referred to the U.S. Housing Sector continuing to weigh heavy on the broader economy. In data releases, the non-manufacturing ISM supported the USD as the figure was released at its highest level since April 2006 at 59.7 (Forecast: 55.3) provided some support to the USD capping losses. In other news, US Treasury Secretary Paulson said that some agreements made in recent talks with China will help create the basis for moving towards a market-determined currency exchange rate, but stressed the effort was a long path of small steps. In U.S. share markets, the NASDAQ fell by -7 points (-0.26%), whilst the Dow Jones fell by -80 points (-0.59%). Crude oil fell by US$0.60 to US$65.61 a barrel.

• The Euro (EUR) gained against the USD as commentary made by Fed officials weighed heavy on the greenback. The EURUSD traded with a range of a low 1.3488 and a high of 1.3555 before closing the day 1.3521 in the New York session. Looking ahead, Key data will be released on Wednesday with the ECB scheduled to increase rates by 25 basis points to 4% from current levels of 3.75%. Further more with markets also speaking of a second rate hike by year end President Trichet’s post press conference will be listened to eagerly for any indication of future rate hike. Once again the usage of the key word “vigilance” will see investors talk about future rate hikes.

• The Japanese Yen (JPY) gained against a broadly weaker USD but still suffered on the back of high yielding carry trades remaining prominent. The EURJPY reached a new record high of 164.62 on expectations the ECB will look to increase rate in their upcoming meeting. Overall the USDJPY traded with a range of a low 121.12 and a high of 121.94 before closing the day at 121.33 in the New York session.

• The Sterling (GBP) gained against the board as further speculation that the BoE may see further rate hikes in the near future. As a result, the GBP traded at 15 year high against the JPY reaching 242.98 and edged closer to the $2 mark against the USD. Overall the GBPUSD traded with a range of a low 1.9911 and a high of 1.9968 before closing the day at 1.9919 in the New York session.

• The Australian Dollar (AUD) continued to gain against the USD as further focus shifted to Wednesday key data release including an RBA rate announcement. As a result the AUD reached a 17 year high on the back of a broadly weaker USD. Overall, the AUDUSD traded with a range of a low 0.8340 and a high of 0.8407 before closing the day at 0.8347 in the New York session. Looking ahead, the RBA is expected to keep rates unchanged at 6.25%, whilst GDP for the first quarter is forecasted to come in at 1.2% (Previous: 1%). UPDATE: RBA rate 6.25% (unchanged) GDP at 1.6% q/q

• The South African Rand (ZAR) was range bound as investors await the central banks rate decision later this week. The central bank is largely expected to hike interest rates by 50 basis points after consumer inflation broke the ceiling of the 3-6 percent target bank at 6.3% in April.

• Gold (XAU) fell by US$1.20 an ounce to US$675.10 in response to profit taking and lower oil prices.