Australian FOREX Daily Outlook 07/11/2007

RBA increase interest rates by 25 basis points.

CURRENCY TRADING SUMMARY –07 NOVEMBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) continued on its slide on growing expectations that fall outs from the US sub prime markets will extend financial losses prompting the Federal Reserve to cut rates further. Much of the sentiment was instigated by Fed Governor Kroszner who said conditions for sub prime borrowers may worsen, dousing demand for the dollar. In U.S. share markets the NASDAQ was up by 30 points (+1.07%) whilst the Dow Jones also gained 117.54 points (+0.87%). Crude oil surged as high as $97.10 a barrel.

·The Euro (EUR) traded at a fresh record high once again on markets pricing in further rate cuts by the Federal Reserve. Overall the EURUSD traded with a low of 1.4470 and a high of 1.4571 before closing the day at 1.4553 in the New York session.

·The Japanese Yen (JPY) was relatively flat against the USD on Tuesday. Despite a broadly weaker dollar the Yen was unable to sustain any gains as investors sought the carry trade. Overall the USDJPY traded with a low of 114.27 and a high of 114.78 before closing the day at 114.60 in the New York session.

·The Sterling (GBP) rose to 26 year highs on confidence that the BoE will keep rates on hold for the remainder of 2008. Market expects The Bank of England will hold borrowing costs at a six-year high at its meeting ending Nov. 8. Overall the GBPUSD traded with a low of 2.0804 and a high of 2.0905 before closing the day at 2.0866 in the New York session.

·The Australian Dollar (AUD) was buoyed by dominant expectations that the RBA would look to increase interest rates on Wednesday morning, whilst the Fed is resigned to cut rates once again in 2007, stopping two consecutive sessions of losses. Overall the AUDUSD traded with a low of 0.9201 and a high of 0.9274 before closing the session at 0.9268. The RBA increased interest rates for the second time in 2007 by 25 basis points, not to be deterred Federal Elections scheduled on the 24^th of November. The Benchmark borrowing costs in Australia now sits at 6.75%, one of the highest of the industrialized world. The AUD was further supported by hawkish comments from the Central Bank, which viewed inflationary pressure to remain prominent in the early part of 2008 indicating to future rate hikes. The AUD traded through 93 cents on Wednesday morning.

• Gold (XAU) rose to the highest since 1980 as record oil prices and a slumping dollar increased concern that inflation will accelerate. XAU traded with a low of 806.65 and a high of 824.90.

TECHNICAL COMMENTARY

·Euro 1.4555

Initial support at 1.4467 (Nov 6 low) followed by 1.4404 (Nov 1 low). Initial resistance is now located at 1.4597 (This week’s open +(last week’s range *0.618) followed by 1.4656 (This week’s open + last week’s range)

·Yen 114.75

Initial support is located at 114.03 (Nov 5 low) followed by 113.78 (Oct 25 low). Initial resistance is now at 114.96 (Nov 5 high) followed by 115.93 (Nov 1 high).

• Pound – 2.0870

Initial support at 2.0755 (Nov 1 low) followed by 2.0671 (Oct 31 low). Initial resistance is now at 2.0906 (Nov 2 trend high) followed by 2.1000 (Psychological round number)

• Australian Dollar – 0.9325

Initial support a 0.9202 (Nov 6 low) followed by 0.9158 (Nov 5 low). Initial resistance is now at 0.9344 (Oct 31 trend high) followed by 0.9446 (0.9143 plus 0.8747 – 0.9050).

• Gold – 824.40

Initial support at 806.40 (Nov 6 low) followed by 801.20 (Nov 5 low). Initial resistance is now at 824.75 (Nov 6 trend high) followed by 825.00 (Round number resistance)