Australian FOREX Daily Outlook 11/07/2007

USD weakness across the board, most currencies rally against the greenback to record highs

CURRENCY TRADING SUMMARY –11 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) fell against most major currencies as US investor confidence waned amid the sub-prime mortgage debacle and the fact that no clear signal was given from Ben Bernanke overnight with regards to interest rate moves in the US. Second tier data from the US was mixed however, focus was keenly squared on the speech by Bernanke which disappointed USD bulls. In the US share markets, the NASDAQ gave up 31pts (-1.2%) whilst the Dow Jones dropped 150pts (1.1%). Crude oil moved higher as tensions in the Middle East escalate. Crude oil rose by US66c a barrel to US$72.81.

• The Euro (EUR) hit an all-time high against the USD as the Euro benefited from the lack lustre speech by Bernanke. EUR/JPY continued trading at near all-time highs before retreating somewhat after unwinding of JPY cross positions entered the market. Overall, the EUR/USD traded within a range of a low 1.3593 and a high of 1.3741 before closing the day at 1.3741 in the New York Session.

• The Japanese Yen (JPY) rallied against the greenback as investors cut back on their exposure to higher yielding currencies especially against the USD. Current account surplus came in higher than the expected 21.7% increase to 31.1%. The CGPI for the month of June disappointed the market however coming in at 0.1% compared to a 0.2% estimate. Overall the USDJPY traded with a range of a low 121.88 and a high of 123.49 before closing the day at 121.84 in the New York session.

• The Sterling (GBP) continued its stellar run against the USD rising to fresh 26 year highs as recent UK data releases and the negative sentiment in the US helped propel cable higher. Overall the GBPUSD traded with a range of a low 2.0123 and a high of 2.0274 before closing the day at 2.0270 in the New York session.

• The Australian Dollar (AUD) also strengthened against the US dollar following in-step with GBP and EUR as people sought to sell the greenback in favour of the high yielding Aussie. Overall the AUDUSD traded with a range of a low 0.8566 and a high of 0.8634 before closing the day at 0.8614 in the New York session. Looking ahead, consumer sentiment is released today. UPDATE: consumer sentiment came in at -0.6%.

• The Canadian Dollar (CAD) was relatively weaker overnight as the BoC hiked its target overnight rate as expected to 4.5%. They did leave the door open to further interest rate hikes as they fell that inflation is a little higher than what they are comfortable with. Overall the USDCAD traded with a range of a low 1.0479 and a high of 1.0546 before closing the day at 1.0519 in the New York session.

• Gold (XAU) rose by US$1.90 an ounce to US$664.40 benefiting from USD weakness.

CURRENCY OF THE WEEK

• GBP/JPY was lower as unwinding of carry trades pushed the GBP lower against the JPY despite a weaker USD. Overall the GBPJPY traded with a range of a low 246.94 and a high of 248.74 before closing the day at 246.97 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3740

Initial support at 1.3592 (July 10 low) followed by 1.3567 (Jul 6 low). Initial resistance is now located at 1.3742 (Jul 10 trend high) followed by 1.4 (Psychological resistance).

• Yen 122.75

Initial support is located at 121.87 (Jul 10 low) followed by 121.49 (Jun 13 low). Initial resistance is now at 123.5 (Jul 10 high) followed by 123.96 (Jun 25 high)

• Pound – 2.0255

Initial support at 2.012 (Jul 10 low) followed by 2.0057 (Jul 6 low). Initial resistance is now at 2.0276 (Jul 10 trend high) followed by 2.0367 (Jul open + (Jun range *0.618)

• Australian Dollar – 0.8595

Initial support a 0.8565 (Jul 10 low) followed by 0.8487 (Jul 2 low). Initial resistance is now at 0.8642 (Jul 10 trend high) followed by 0.8700 (Round Number)

• Gold – 664

Initial support at 653.8 (Jul 9 low) followed by 645.6 (Jul 6 low). Initial resistance is now at 665.07 (Jul 10 high) followed by 667.65 (May 2 low)