Australian FOREX Daily Outlook 14/02/2007

CURRENCY TRADING SUMMARY –14 FEBRUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) dropped yesterday following a widening of the trade deficit, raising concerns over US economic growth. With markets forecasting a figure of -59.50 bln the figure was released worse than expected at -61.18 bln. As a result the USD weakened considerably against other majors except the GBP. In US share markets, the NASDAQ was up 9.50 points (0.39%) whilst the Dow Jones was also up by 102.30 points (0.81%). Crude oil also rose over Tuesday by US$1.27 a barrel to US$59.80. Looking ahead, key indicators look to increase later on today from the US, with the Retails sales being made public. Economists are predicting further poor figures in the shape of a forecasted 0.40% lower than the previous 0.90% increase. Furthermore, plenty of interest will surround the Federal Reserve chairman Bernanke testifying before the senate in his semi annual speech to congress.

• The Euro (EUR) strengthened against the Dollar following poor data released from the US. Added to this was solid Eurozone growth data, which boosted the possibility of the ECB raising interest rates in March. GDP for the region came in better than the expected 0.6% at 0.9% for the fourth quarter. Whilst Industrial production was also stronger with 1.0% the figure rather than the forecasted 0.3% rise. The German ZEW survey which has been overshadowed by the German IFO in recent months was in fact worse off with the figure at 2.9 instead of the predicted 5.0, yet due to its declining importance the ZEW did little to hinder the strengthening Euro. Overall, the Euro traded with a range of a low 1.2953 and a high 1.3045 before closing the day at 1.3030 in the New York session.

• The Japanese Yen (JPY) strengthened yesterday following a drop against all other majors on Monday subsequent of the G7 failure to address the Yen weakness. Overall the Yen traded within a low of 121.09 and a high of 121.96 before closing the day at 121.19 in the New York session. Looking ahead the Current Account Surplus is released out of Japan for the month of December with economists predicting a figure of 2042 bln higher than the previous 1756.4 bln. UPDATE: Current Account 1776.8 bln.
• The Sterling (GBP) fell against the USD following a poor figure for CPI. With markets expecting a growth of 2.9% where the figure was slightly softer at 2.7%. Overall, the Sterling traded within a range of a low 1.9404 and a high of 1.9524 before closing at 1.9456 by the end of the New York session. Looking ahead, Jobless claims change is released out of the UK with markets predicting a stronger figure of -5k less than the previous -5.5k.
• The Australian Dollar (AUD) strengthened against the USD following a further widening of the US trade deficit. Overall, the AUD traded with a range of a low 0.7710 and a high of 0.7793 before closing 0.7793 (near day highs) in the New York session.

• Gold (XAU) rose slightly by US$0.47 an ounce to close at US$669.00 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3035

Initial support at 1.2940 (Feb 12 low) followed by 1.2911 (Feb 6 low). Initial resistance is now located at 1.3047 (Feb 9 high) followed by 1.3074 (Feb 2 high)

• Yen 121.25

Initial support is located at 120.99 (Feb 9 low) followed by 120.78 (61.8% retracement of the 119.96 to 122.10 advance). Initial resistance is now at 122.20 (Jan 29 high) followed by 122.38 (61.8% retracement of the 135.18 to 101.67 decline).

• Pound – 1.9465

Initial support at 1.9402 (Feb 13 low) followed by 1.9317 (Jan 11 corrective low). Initial resistance is now at 1.9568 (Feb 12 high) followed by 1.9604 (Feb 9 high).

• Australian Dollar – 0.7785

Initial support at 0.7707 (Feb 12 low) followed by 0.7697 (50% retracement of 0.7414-0.7982 and Jan 31 low). Initial resistance is now at 0.7780 (Feb 12 high) followed by 0.7826 (Feb 9 high).

• Gold – 664.25

Initial support at 657.30 (Feb 9 low) followed by 648.00 (Feb 8 low). Initial resistance is now at 669.00 (Feb 9 high) followed by 676.35 (Jul 17 reaction high)