Australian FOREX Daily Outlook 12/07/2007

US Housing Sector in focus causing EURUSD all time high, as carry trades return. Aussie Unemployment Rate set for release.

CURRENCY TRADING SUMMARY –12 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) eased against a basket of currencies as ongoing implications of the sub-prim mortgage market continued to place doubt in the livelihood of the economy, regardless of Fed Reserve Governor Plosser mentioned that the housing sector was not affecting the broader financial system. In US share markets the NASDAQ rose by 12.63 points (+0.48%) whilst the Dow Jones also rose by 76.17 points (+0.55%). Crude oil eased from 11 month highs falling by US$0.25 a barrel to US$72.56. Looking ahead, key data will be released in the form of May’s Trade Balance economist’s expectant of a figure at -60 bln, with the previous figure being released at -58.5 bln.

• The Euro (EUR) reached a fresh all time high for the second successive session as on the back of growing concerns in the U.S. housing sector. The Euro land currency was also aided by indicative commentary from President Trichet, signaling future rate hikes. Overall, the EURUSD traded with a range of a low 1.3732 and a high of 1.3787 before closing the day at 1.3759 in the New York session. On the data front, Thursday is proving to be an important day for the EZ with the release of Industrial Production and GDP for the Q1 will be made public.

• The Japanese Yen (JPY) eased across the board barring the kiwi dollar (following the previous session rally) as the appetite for risk returned. Overall the USDJPY traded with a range of a low 120.99 and a high of 122.30 before closing the day 122.10 in the New York session. Looking ahead the BoJ rate announcement is expected for release on Thursday with expectations are at a flat 0.50%.

• The Sterling (GBP) continued to rally, trading at 26 year highs on a broadly weaker dollar. Overall, the GBPUSD traded with a range of a low 2.0248 and a high of 2.362 before closing the day at 2.0341.

• The Australian Dollar (AUD) rose and traded above key levels despite a poor consumer confidence reading on Wednesday. Overall the AUDUSD traded with a range of a low 0.8577 and a high of 0.8642 before closing the day at 0.8610 in the New York session. Looking ahead, Unemployment rate is expected to remain steady at 4.2% for the month of June.

• The Canadian Dollar (CAD) moved higher on Wednesday as the fast appreciation of Canadian Dollar this year spurred the Conference Board of Canada to cut its 2007 economic growth forecast due to stronger currency’s detrimental impact on exports. Overall the USDCAD traded with a range of a low 1.0534 and a high of 1.0612 before closing the day at 1.0543 in the New York session. Thursday will also prove a key data day for the Canadian Dollar with the release of May’s Trade Balance.

• Gold (XAU) eased by US$1.90 an ounce to US$662.10.

CURRENCY PAIR IN FOCUS

• GBP/JPY Stronger sterling in combination with JPY weakness ahead of the interest rate decision pushed GBPJPY near record highs once again. Overall, the GBPJPY traded with a range of a low 245.15 and a high of 248.49 before closing the day at 248.39 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3745

Initial support at 1.3592 (July 10 low) followed by 1.3567 (Jul 6 low). Initial resistance is now located at 1.3787 (Jul 11 trend high) followed by 1.3852 (Open + (Last weeks range * 1.618).

• Yen 122.30

Initial support is located at 120.76 (Jun 8 reaction low) followed by 120.15 (May 16 low). Initial resistance is now at 123.68 (Jul 7 high) followed by 123.96 (Jun 25 high)

• Pound – 2.0315

Initial support at 2.0243 (Jul 11 low) followed by 2.0120 (Jul 10 low). Initial resistance is now at 2.0365 (Jul 11 trend high) followed by 2.0367 (Jul open + (Jun range *0.618)

• Australian Dollar – 0.8625

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 – 661.30

Initial support at 658.90 (Jul 10 low) followed by 653.80 (Jul 9 low). Initial resistance is now at 666.10 (Jul 11 high) followed by 667.65 (May 2 low)