Australian FOREX Daily Outlook 12/01/2007

CURRENCY TRADING SUMMARY –12 JANUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) was stronger against the majors except for the pound in the overnight forex session as the US Philadelphia Federal Reserve manufacturing index was revised to -2.3 from -4.3. Initial jobless claims dropped to 299k from an expected 325k, the lowest level in 5 months. In other markets, the Dow Jones index jumped 72pts and the NASDAQ climbed 25pts as the fall in oil sparked a market rally together with an increased optimism about the tech sector. Crude oil dropped a further US$1.85 to US$51.88 a barrel as technical and fund selling together with US refined supply increases helped oil reach levels not seen since June 1, 2005. Looking ahead, US retail sales are due out tonight.
  

• The Euro (EUR) traded within a low of 1.2882 and a high of 1.3016, before closing at 1.2890 in the New York session. On the data front, the ECB kept rates on hold as expected with ECB president Trichet removing “strong vigilance” in his speech and indicating no further interest rate changes until March at least. Eurozone GDP for the 3^rd quarter came in at 0.5 as expected.
  

• The Japanese Yen (JPY) traded within a low of 119.50 and a high of 120.65 versus the dollar, before closing at 120.42 in the New York session. The dollar rallied against the Yen after the dovish speech by the ECB causing the 120.00 barrier to be broken.
  

• The Sterling (GBP) traded within a low of 1.9319 and a high of 1.9550, before closing at 1.9448 in the New York session. On the data front, the BoE surprised markets by hiking rates to 5.25% and delivering a very hawkish press conference afterwards noting inflationary pressures increasing in the near future. Industrial production posted an increase of 0.5% compared to 0.3%.
  

• The Australian Dollar (AUD) traded within a low of 0.7770 and a high of 0.7840, before closing at 0.7810 in the New York session.
  

• Gold (XAU) rose by US40c to US$613.80 an ounce in tight trading and against a rising USD.

TECHNICAL COMMENTARY

• Euro 1.2890

Initial support at 1.2882 (Jan 11 low) followed by 1.2839 (Nov 22, 2006 low). Initial resistance is now located at 1.3016 (Jan 11 reaction high) followed by 1.3054 (Jan 9 high and key intraday resistance).

• Yen 120.50

Initial support is located at 119.14 (Jan 10 low) followed by 117.98 (Jan 5 corrective low). Initial resistance is now at 120.65 (Jan 11 high) followed by 121.07 (Dec 12, 2005 high).

• Pound – 1.9450

Initial support at 1.9316 (Jan 1 low) followed by 1.9261 (Jan 8 low). Initial resistance is now at 1.9565 (61.8% retracement of the 1.9753-1.9261 decline) followed by 1.9753 (Jan 3 reaction high).

• Australian Dollar – 0.7800

Initial support at 0.7759 (Jan 10 low) followed by 0.7732 (Nov 24, 2006 low). Initial resistance is now at 0.7855 (Jan 5 high) followed by 0.7871 (50% retracement of the 0.7982-0.7759 decline).

• Gold – 612

Initial support at 602.2 (Jan 5 low) followed by 600.0 (Psychological round number). Initial resistance is now at 626.3 (Jan 5 high) followed by 630.75 (Jan 4 high).