Australian FOREX Daily Outlook 12/04/2007

High yielding currencies the biggest movers as IMF statements give the go ahead for carry trades. Key data for Australia with unemployment rate as ECB prepares for Interest rate decision.

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

• U.S. Dollar Trading (USD) received some support following the release of the minutes FOMC meeting (Mar 21^st) which indicated that policy-makers were of the belief that further increases of rates may be required to contain inflation. Although the release provided the Dollar with some support initially, it soon surrendered its gains post announcement. In US share markets, the NASDAQ fell by 18.30 points (-0.74%) whilst the Dow Jones also fell by 89.23 points (-0.71%). Crude oil rose slightly on Wednesday by US$0.04 a barrel to US$62.05.

• The Euro (EUR) traded in a tight range on Wednesday against the USD. Overall, the Euro traded with a low 1.3407 and a high of 1.3441 before closing relatively unchanged at 1.3426 in the New York session. Focus now shifts to the ECB interest rate announcement later on today. General market sentiment is that the rates will remain unchanged at 3.75%, yet accompanying statements may indicate a hike in their next meeting.

• The Japanese Yen (JPY) slumped to a fresh low against the Euro reaching 160.37. Against the USD the JPY reached a six-week low as the IMF stated that it saw no need for ‘heavy-handed’ action on the yen carry trade. As a result, high yielding currencies such as the AUD and NZD touched decade highs against the JPY as investors shifted away from a risk-averse focus and continued to enter into risky carry trades. Overall the JPY traded with a range of a low of 118.88 and a high of 119.55 before closing at 119.31 in the New York session.

• The Sterling (GBP) rose to a week high versus the USD and a five-week peak against the JPY on Wednesday. This was largely attributed by strong UK retail sales. Overall, the GBP traded with a low 1.9712 and a high of 1.9817 before closing the day at 1.9751 in the New York session. Looking ahead, the Trade Balance is scheduled for release later on today with markets expecting a slight widening of the deficit to -6.4 bln (Previous: -6.2 bln)

• The Australian Dollar (AUD) continues to find demand with investors remaining bullish AUD, despite plenty of sideways trading. The Aussie dollar did find a lot of strength as a high yielding currency, generally funded by the low interest bearing JPY, reaching decade highs. Overall the AUD traded with a low of 0.8227 and a high of 0.8266 before closing at 0.8247 in the New York session. Looking ahead plenty of market focus will be placed on the Unemployment rate announcement today with markets expecting the figure to remain unchanged at 4.6%.

• Gold (XAU) traded in a narrow range for much of Wednesday to end relatively unchanged. Gold rose by US$0.50 an ounce to $682.20.

TECHNICAL COMMENTARY

• Euro 1.3440

Initial support at 1.3339 (Apr 9 low) followed by 1.3288 (Mar 30 low). Initial resistance is now located at 1.3457 (Apr 10 trend high) followed by 1.3481 (Mar 11, 2005 reaction high)

• Yen 119.35

Initial support is located at 118.43 (Apr 5 low) followed by 117.20 (Mar 30 low). Initial resistance is now at 119.55 (Apr 11 high) followed by 120.00 (Psychological round number resistance)

• Pound – 1.9750

Initial support at 1.9709 (Apr 11 low) followed by 1.9591 (Apr 9 low). Initial resistance is now at 1.9823 (Apr 3 high) followed by 1.9917 (Jan 23 trend high)

• Australian Dollar – 0.8245

Initial support a 0.8150 (April 9 low) followed by 0.8064 (Apr 4 low). Initial resistance is now at 0.8270 (Apr 11 high) followed by 0.8350 (Psychological round number)

• Gold – 677.15

Initial support at 663.85 (Apr 4 low) followed by 652.40 (Mar 19 low). Initial resistance is now at 681.51 (Apr 10 high) followed by 682.82 (Trend-Line resistance)