Australian FOREX Daily Outlook 08/08/2007

Unstable Greenback as market grows wary of US economic growth and credit issues.

CURRENCY TRADING SUMMARY –08 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) strengthened broadly against major currencies as the Federal Reserve kept interest rates on hold at 5.25% as expected. The Federal Reserve mentioned that inflation remained its primary concern and acknowledged the recent volatility in the credit sector and the weakness in the housing market but stipulated that the economy would likely expand at a moderate pace going forward. Market interpreted the statements as indicating a pause this year in interest rate movements from the Fed.

The Dow Jones moved erratically throughout the session, rising 35pts (0.3%), while the NASDAQ strengthened by 14pts (0.6%). Crude oil recovered some of its losses from yesterday rising by US63c to US$71.80 a barrel.

• The Euro (EUR) was weaker against the USD as the Fed decision to keep rates on hold meant the Greenback for now maintains its yield advantage over the Euro. German industrial output disappointed coming in at -0.4% compared to a 0.6% estimate. Overall, the EURUSD traded with a range of a low 1.3736 and a high of 1.3816 before closing the day at 1.3766 in the New York session.

• The Japanese Yen (JPY) finished almost unchanged against the greenback after initially rallying against the USD before paring back gains. Overall, the USDJPY traded with a range of a low 117.97 and a high of 118.91 before closing the day at 118.71 in the New York session. Looking ahead, private machinery orders are due out today.

• The Sterling (GBP) was softer in the European and New York sessions as data showed that British retail sales growth has slowed to its weakest pace this year. Overall, the GBPUSD traded with a range of a low 2.0191 and a high of 2.0336 before closing the day at 2.0248 in the New York session. Looking ahead, the BoE inflation report is due out.

• The Australian Dollar (AUD) was initially weaker before recouping most of its losses for the session as the Aussie remained range bound ahead of the interest rate announcement from the RBA. Overall, the AUDUSD traded with a low of 0.8514 and a high of 0.8592 before closing the day at 0.8557 in the New York session. Looking ahead today brings us the interest rate announcement from the RBA. General consensus is for a 25bp rise to 6.5%. UPDATE: RBA raises rates to 6.5% as expected.

• Gold (XAU) fell again by US$1.00 an ounce to US$672.30 as the strength in the USD hampered moves to the upside in the precious metal.

TECHNICAL COMMENTARY

• Euro 1.3740

Initial support at 1.3683 (Aug 3 low) followed by 1.3637 (Aug 1 low). Initial resistance is now located at 1.3853 (Jul 24 trend high) followed by 1.3941 (This week’s open
+ (last week’s range * 0.618).

• Yen 118.80

Initial support is located at 117.18 (Aug 6 low) followed by 116.37 (Mar 28 low). Initial resistance is now at 119.11 (Aug 6 high) followed by 119.51 (Jul 31 high).

• Pound – 2.0230

Initial support at 2.0180 (Jul 30 low) followed by 2.0134 (July 30 low). Initial resistance is now at 2.0464 (Aug 6 high) followed by 2.0474 (61.8% of the 2.0656 to 2.0180 decline)

• Australian Dollar – 0.8550

Initial support a 0.8491 (Aug 2 low) followed by 0.8435 (61.8% retracement of the 0.8163 to 0.8875 advance). Initial resistance is now at 0.8605 (Aug 2 high) followed by 0.8616 (Jul 31 high)

• Gold – 671

Initial support at 665.2 (Aug 3 low) followed by 659.4 (Aug 1 low). Initial resistance is now at 676.77 (Jul 26 high) followed by 687.40 (Jul 24 high)