Australian FOREX Daily Outlook 12/09/2007

Bernanke hints at rate cuts providing confidence to financial markets.

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

• U.S. Dollar Trading (USD) the USD fell against most other majors, trading near record lows against the EUR, with further views that the Fed will look to cut interest rates at the next meeting. Much of the sentiment came from Bernanke’s speech hinted that the Central Bank needs to act due to the latest crisis hinting to a rate cut. In U.S. share markets the NASDAQ was up 38.36 points (+1.5%) whilst the Dow Jones 180.54 points (1.38%). Crude oil rose by US$0.74 a barrel to US$78.23 on decision by OPEC nations to lift production quotas.

• The Euro (EUR) traded near record highs against the USD as further expectations of a Fed rate cut on Sep 18 circulated the market. Further more, ECB Trichet signaled that credit losses did not impact EU financial institutions much and growth was not slowing gave added support to the Euro, despite rates likely to be kept on hold in the foreseeable future. Overall the EURUSD traded with a range of a low 1.3778 and a high of 1.3849 before closing the day at 1.3827 in the New York session.

• The Japanese Yen (JPY) Rate cut expectation in the US revived the US equity markets, encouraging carry trades’, ensuring the Japanese Yen was heavily weighed upon. Overall the USDJPY traded with a range of a low 113.39 and a high of 114.38 before closing the day at 114.29 in the New York session.

• The Sterling (GBP) gained against the USD as investors looked to rebuild the carry trades encouraged by prospects of a Fed rate cut. The GBPUSD trade with a low 2.0221and a high of 2.0336 before closing the day at 2.0313 in the New York session.

• The Australian Dollar (AUD) traded higher bought up as a high yielding currency. Overall the AUDUSD traded with a range of a low 0.8238 and a high of 0.8330 before closing the day at 0.8253 in the New York session.

• Gold (XAU) was supported by a weaker USD and higher oil prices trading at a high of 714.15 and a low of 703.05.

TECHNICAL COMMENTARY

• Euro 1.3835

Initial support at 1.3765 (Sep 10 low) followed by 1.3720 (Former resistance Aug 31). Initial resistance is now located at 1.3853 (Jul 24 high) followed by 1.3924 (Sep open + (Aug range *0.618).

• Yen 114.10

Initial support is located at 112.61 (Sep 10 low) followed by 111.61 (Aug 17 low). Initial resistance is now at 114.38 (Sep 11 high) followed by 115.66 (Sep 7 high).

• Pound – 2.0310

Initial support at 2.0235 (Sep 11 low) followed by 2.0039 (Sep 5 low). Initial resistance is now at 2.0400 (Aug 8 reaction high) followed by 2.0419 (76.4% retracement of 2.0656 – 1.9652)

• Australian Dollar – 0.8335

Initial support a 0.8156 (Sep 3 low) followed by 0.8106 (Aug 31 low). Initial resistance is now at 0.8351 (Sep 11 high) followed by 0.8416 (61.8 % retracement of the 0.8873 to 0.7676).

• Gold – 712.05

Initial support at 687.40 (Jul 24 low) followed by 681.14 (Sep 6 low). Initial resistance is now at 714.80 (Sep 11 high) followed by 720.10 (May 15 high)