Australian FOREX Daily Outlook 14/08/2007

Central banks further inject liquidity high yielder’s continue to lose ground. Key data day ahead for US, EZ and UK.

CURRENCY TRADING SUMMARY –14 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) rallied through out the day as central banks continued to fund liquidity into financial markets, in an attempt avoid dangers of a credit squeeze. In data news, Retail Sales figures for the month of July were released on consensus, giving further justification that rates may remain unchanged in the U.S. by year end. In U.S. share markets the NASDAQ was down 2.65 points (-0.10%) whilst the Dow Jones was also slightly down by 3.01 points (-0.02%). Crude oil rose by US$0.22 a barrel to US$71.69 as central bank injections eased market jitters of a reduction in global oil demand. Looking ahead key data out of the U.S. will be released in the form of Core PPI for the month of July with expectations that the figure will be at 0.2%, previous at 0.3%. In other news, Trade Balance will cause some interest on Tuesday with analysts expecting the deficit to widen to -61 bln from the previous figure -60.4 bln.

• The Euro (EUR) traded at a month low against the USD as investors continued to lower expectations of an ECB rate hike in September.Overall the EURUSD traded with a low 1.3606 and a high of 1.3709 before closing the day at 1.3619 in the New York session. Looking ahead, preliminary GDP release for the second quarter is expected to show a drop from 0.7% to 0.6%, whilst the Industrial Production is expected to decline by -0.1% (Previous: 0.9%).

• The Japanese Yen (JPY) was largely range bound and somewhat stable compared to recent session where credit issues have ensured that carry trades were unwound against the Japanese Yen. Overall the USDJPY traded with a low of 117.68 and a high of 118.57 before closing at 118.37 in the New York session.

• The Sterling (GBP) fell sharply on Monday touching a 5 week low Vs. USD and continued to be unwound against the Japanese Yen. In data news the PPI failed to provide any support to the Sterling despite being released on consensus. Overall the GBPUSD traded with a range of a low 2.0086 and a high of 2.0258 before closing the day at 2.0137 in the New York session. A heavy data day is expected out of the UK on Tuesday with the release of key inflationary data in CPI for the month of July (Forecast: -0.2%, previous: 0.2%) as well as Retail Sales (Forecast: -0.1%, Previous: 0.5%)

• The Australian Dollar (AUD) was supported during the Asian Session of trading with the release of the Monetary Policy Statement indicating further tightening bias to 6.75% in 2008, before pairing its gains in the latter part of Monday. Overall the AUDUSD traded with a range of a low 0.8407 and a high of 0.8505 before closing day 0.8421 in the New York session.

• Gold (XAU) failed to break key resistance levels of 676.00 trading at a high of 671.95 before ending the day down US$0.70 at US$670.90 an ounce.

TECHNICAL COMMENTARY

• Euro 1.3610

Initial support at 1.3605 (Aug 13 low) followed by 1.3558 (50% retracement of the 1.3262 to 1.3853 advance). Initial resistance is now located at 1.3711 (Aug 13 high) followed by 1.3819 (Aug 9 high).

• Yen 117.95

Initial support is located at 117.68 (Aug 13 low) followed by 117.18 (Aug 6 low). Initial resistance is now at 118.76 (Aug 10 high) followed by 119.85 (Aug 8 high).

• Pound – 2.0115

Initial support at 2.0057 (Jul 6 low) followed by 2.0017 (61.8% retracement of the 1.9622 to 2.0656 advance). Initial resistance is now at 2.0270 (Aug 10 high) followed by 2.0400 (Aug 8 high)

• Australian Dollar – 0.8395

Initial support a 0.8354 (Jun 27 low) followed by 0.8333 (Jun 14 low). Initial resistance is now at 0.8511 (Aug 10 high) followed by 0.8664 (Aug 9 reaction high)

• Gold – 668.90

Initial support at 658.75 (Aug 10 low) followed by 645.60 (Jul 6 low). Initial resistance is now at 676.80 (Aug 8 high) followed by 687.40 (Jul 24 high)