Australian FOREX Daily Outlook 09/07/2007

Boost in US Payrolls data gives short reprieve as GBPJPY and EURJPY crosses reach all time highs.

CURRENCY TRADING SUMMARY –09 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) initially gained following a strong reading in Non Farm Payrolls coming in better than expectations at 132 for the month of June with the previous being revised higher at 190. Yet gains against a basket of currencies were short lived as the data did little to change the view of the Federal Reserve keeping rates on hold for the remainder of the year. In other relevant data, Unemployment Rate came in on expectations of 4.5% for the month of June. In U.S. share markets the NASDAQ was up by 9.86 points (0.37%) whilst the Dow Jones was also up by 45.84 points (0.34%). Crude oil fell by US$0.22 a barrel to US$72.59.

• The Euro (EUR) recovered earlier losses against the greenback as strong jobs data assisted in dollar rally. Although the ECB chose to keep rates on hold on Thursday, relatively hawkish comments by President Trichet has allowed for markets to price in a 2 out of three chance that rates will be tightened by September, causing the Euro to return to levels above 1.3600. Overall the EURUSD traded with a range of a low 1.3576 and a high of 1.3642 before closing the day at 1.3621 in the New York session. Looking ahead, the EZ largest economy, Germany, will be releasing its Trade Balance figures for the month of May, with expectations the figure will be released at 16 bln (Previous: 15.8 bln)

• The Japanese Yen (JPY) eased for the fourth consecutive session, further affected by positive US payrolls data. The JPY continued to suffer across the board, hitting a record low against the Euro at 168.10 and Sterling at 248.11, for second straight session as investors continued to sell the currency for high yielding alternatives. Overall, the USDJPY traded with a range of a low 122.86 and a high of 123.56 before closing the day at 123.38 in the New York session. Looking ahead, key data will be released in the form of Machinery Orders as with economists expecting the figure to be out at 2.3% for the month of May, up from the previous 2.2%. UPDATE: Machinery Orders 5.9%

• The Sterling (GBP) steadied below last week’s 26 year highs versus the dollar on Friday, staying comfortably above the $2 mark, supported by Thursday’s interest rate hike and expectations for further tightening. Overall, the GBPUSD traded with a range of a low 2.0060 and a high of 2.0142 before closing the day at 2.0105 in the New York session.

• The Australian Dollar (AUD) was range bound for most of the session as despite losing some of its gains in the U.S. session of trading on positive payrolls data. Overall the AUDUSD traded with a range of a low 0.8549 and a high of 0.8590 before closing the day at 0.8575 in the New York session. .

• The Canadian Dollar (CAD) pushed to a 30-year high against the greenback on Friday, supported by strong employment data, firm oil prices and expectations of a rate hike by the Bank of Canada next week. Overall the USDCAD traded with a range of a low 1.0464 and a high of 1.0567 before closing the day at 1.0494 in the New York session.

• Gold (XAU) rose by US$4.20 an ounce to US$654.80

CURRENCY OF THE WEEK

• GBP/JPY hit a new record high at 248.11 on Friday, as carry trading prevails. BoE hiked rates on Thursday, widening the interest rate differential with Japan. In addition to that, majority of the market expects a further rate hike by the end of the year, reaching 6%. Overall the GBPJPY traded with a range of a low 247.09 and a high of 248.11 before closing the day at 248.03.

TECHNICAL COMMENTARY

• Euro 1.3625

Initial support at 1.3567 (July 6 low) followed by 1.3527 (Jul 2 low). Initial resistance is now located at 1.3662 (Jul 5 high) followed by 1.3683 (Apr 27 trend high)

• Yen 123.45

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 – 2.0120

Initial support at 2.0057 (Jul 6 low) followed by 1.9974 (Jun 28 low). Initial resistance is now at 2.0208 (Jul 4 multi year hi) followed by 2.0244 (Tues open + (Mon range *0.618)

• Australian Dollar – 0.8580

Initial support a 0.8541 (June 4 low) followed by 0.8460 (Jun 29 low). Initial resistance is now at 0.8612 (Jul 5 high) followed by 0.8700 (Round Number)

• Gold – 654.90

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)