Australian FOREX Daily Outlook 15/08/2007

Ongoing jitters in markets as credit worries continue to spread into other economies. US CPI data ahead.

CURRENCY TRADING SUMMARY –15 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) continued on its correction against a basket of currencies as ongoing risk exposure weighed heavy on high yielding carry trades. As credit fears still remained, a drop in stock prices ensured that the Japanese Yen pulled down the EUR and the GBP further relieving the USD. In data specific news the US Trade Balance narrowed whilst Core PPI data for the month of July was slightly down on expectations. In U.S. share markets the NASDAQ was down 43.12 points (-1.70%) whilst the Dow Jones was also down 207.61 (-1.57%). Crude oil rose by US$0.76 a barrel to US$72.38. Looking ahead, although plenty of focus has been placed on other market factors in recent times, key data will be released in the form of Core CPI, NY fed manufacturing survey, TIC flows and Industrial Production.

• The Euro (EUR) continued to paired off against the USD as on what appears to be ongoing carry trade unwinding in reaction to the Credit squeeze. The ECB unsuccessfully tried to cool investors and slowly withdraw the extra liquidity pumped lately however several Canadian trusts got into loan trouble and thus sent a serious credit squeeze message to market investors. Trichet said money markets will normalize as the banking system retains the injections of liquidity. The EUR flash GDP estimate cam in higher but its supporting effect was limited for the EUR, especially after the US Trade balance showed stronger exports. Overall the EURUSD traded with a range of a low 1.3536 and a high of 1.3626 before closing the day at 1.3542 in the New York session.

• The Japanese Yen (JPY) continued to trade in its recent multi session range as ongoing credit worries further attributed to carry trade unwinding. The USDJPY traded with a range of a low 117.67 and a high of 118.52 before closing the day at 117.82 in the New York session.

• The Sterling (GBP) fell today as UK CPI data did very little to provide any support in a risk aversion market. Overall the GBPUSD traded with a range of a low 1.9964 and a high of 2.0131 before closing the day at 1.9970 in the New York session. Several key data release are scheduled for release out of the UK on Wednesday, with the BoE minutes of the August meeting expected to be confirmed at 7 – 2 in favor of rates being steady. Further more, Unemployment (Forecast: 5.4% Prior: 5.4%) will also cause plenty of interest.

• The Australian Dollar (AUD) broke key support levels of 0.8400 in the early part of the Asian session and failed to regain any of its losses as ongoing credit issues ensured the high yielding bulls reversed their sentiment the currency. Highlighting this was the AUDJPY reaching a low of 97.82 in the early part of Wednesday trade. Overall the AUDUSD traded with a range of a low 0.8346 and a high of 0.8426 before closing the day at 0.8349 in the New York session.

COMMODITY IN FOCUS

• Gold (XAU) was subject to plenty of buying interest in the early part of the day before ensuring that a correction on the precious metal which failed to comprehensively break key resistance levels of 670.00. As result XAU paired half its gains during the session, trading with a low US$666.05 and a high of US$671.25 before closing the session at US$669.70

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)