Australian FOREX Daily Outlook 10/07/2007

GBPJPY and EURJPY continue to trade at record highs. Federal Reserve Chairman expected to talk on inflation in the U.S. Economy.

CURRENCY TRADING SUMMARY –10 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) was relatively steady against a basket of majors on Monday, largely attributed to absence of data out of the U.S. economy. However the Dollar continued to remain pressured with expectations that the Federal Reserve will hold rates for the remainder of the year, whilst other respective central banks are foreseen to be tightening. In other news, Friday’s robust jobs report was not enough to reverse the recent trend of narrowing interest rate advantage for the dollar over major European currencies, which has eroded demand for the greenback according to analysts. In U.S. share markets, the NASDAQ was up by 3.51 points (+0.13%) whilst the Dow Jones also rose by 38.29 points (+0.28%). Crude oil touched 11 month highs during the intra day of trading with a high of US$76.32. Overall, oil rose by US$0.16 a barrel to US$75.78. Looking ahead, plenty of attention will surround Federal Reserve Chairman Bernanke today, who is expected to talk of inflation at 1700 GMT.

• The Euro (EUR) was steady against the USD on Monday. In data specific news, the German Trade Balance came in better than expected at 17.6 bln (Forecast: 16 bln), yet did little to move the Euro out of its tight trading range against the USD. The EURJPY reached another record high on Monday of 168.55. Overall the EURUSD traded with a range of a low 1.3610 and a high of 1.3639 before closing the day at 1.3624 in the New York session.

• The Japanese Yen (JPY) failed to receive initial support from a robust Machinery Orders figure for the month of May. The Japanese Yen continued to fund high yielder’s despite holding relatively firm against the dollar. Highlighted by the EURJPY reaching a fresh record high of 168.55 before trading below 168.00 levels late in the session. Japanese Vice-Finance Minister Hideto Fujii reiterated on Monday that he is watching currencies carefully, although he declined to comment on specific levels or daily movements in the foreign exchange market. Overall the USDJPY traded with a range of a low 123.22 and a high of 123.67 before closing the day at 123.33 in the New York session.

• The Sterling (GBP) continued to trade comfortably above the 2.0000 levels on Monday despite PPI Core Output slightly down on expectations, yet was not enough to diminish the bullish sentiment on Sterling. Overall the GBPUSD traded with a range of a low 2.0099 and a high of 2.0170 before closing the day at 2.0150 in the New York session. Looking ahead key data out of the UK on Tuesday will be released in the form of May’s Trade Balance, with forecasts the figure will be released at -6.6 bln (Prior: -6.32 bln)

• The Australian Dollar (AUD) was stuck in a tight but definitive range through out Monday’s session as investors continued to trade the levels. Overall the AUDUSD traded with a range of a low 0.8569 and a high of 0.8615 before closing the day at 0.8602 in the New York session.

• The Canadian Dollar (CAD) touched 1.0445 levels against the USD, ahead of Tuesday’s interest rate announcement, where the Bank of Canada is expected to raise its key overnight rate for the first time in over a year. Overall the USDCAD traded with a range of a low 1.0445 and a high of 1.0501 before closing the day at 1.0484 in the New York session. Looking ahead, as stated above the BoC is expected to increase interest rates by 25 basis points today, leaving the cash rate 4.50%

• Gold (XAU) rose by US$7.70 an ounce to US$662.50.

CURRENCY OF THE WEEK

• GBP/JPY hit a fresh 15-year high at 248.79 yen, as a favorable environment for carry trades continued to batter the low-yielding Japanese unit. The yen recovered most of the losses against the pound after Japanese-Vice Finance Minister Hideto Fujii said the economy was firm, something that should be reflected in exchange rates. Still, investor’s appetite for carry trades is likely to prevent a strong rebound in the yen. Overall the GBPJPY traded with a range of a low 248.16 and a high of 248.79 before closing the day at 248.53 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3620

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 123.25

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 – 2.0160

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 – 0.8600

Initial support a 0.8541 (June 4 low) followed by 0.8460 (Jun 29 low). Initial resistance is now at 0.8615 (Jul 9 high) followed by 0.8700 (Round Number)

• Gold – 659.90

Initial support at 648.85 (Jul 2 low) followed by 640.00 (Jun 26 low). Initial resistance is now at 662.35 (61.8% retracement 674.00 to 643.50 decline) followed by 674.00 (Jun 4 high)