Australian FOREX Daily Outlook 16/04/2007

G7 summit does not interfere on carry trades as bias remains the same as Essen meeting. Euro reaches two year high against USD and record high against JPY. USset to release Retail sales, NY Fed manufacturing survey and Tic Flows

CURRENCY TRADING SUMMARY –16 APRIL 07 (23:30GMT)

• U.S. Dollar Trading (USD) had weakened against all other majors on Friday as plenty of attention was being placed on the G7 summit held in Washington. Officials stated on Friday that they would not change their language from previous meeting held in Essen, Germany.The group reiterated its call from its last meeting on flexibility in emerging nation’s currencies, such as China. With markets confident that bias will remain, the USD rose broadly pairing earlier losses. In US share markets, the NASDAQ was up 11.62 points (0.47%) whilst the Dow Jones was also up rising for the tenth time in the last eleven days by 59.17 points (0.47%) an indication that investors are more confident in equity markets following recent global volatility. Crude oil fell by US$0.38 a barrel to US$63.57. Looking ahead a heavy data day is expected out of the US, beginning with Retail Sales (Forecast: 0.8%, Previous: -0.1%), NY Fed Manufacturing survey (Forecast: 7.0, Previous: 1.9) and finally TIC flows (Forecast: 78.0, Previous: 97.4). In other news, with so much attention being placed on a possible trade rift between US and China, officials from both nations are scheduled to meet today and it is assumed that reference will be made to the possible protectionism being instilled.

• The Euro (EUR) reached a near two year high against the USD at 1.3555, and a fresh record high against the JPY of 161.46 before pairing its gains against both currencies. With Eurozone industrial production released inline with expectations insured that the Euro continued to look bullish. Overall the EURUSD traded with a range of a low 1.3482 and a high of 1.3555 before closing at 1.3534 in the New York session. Looking ahead, market moving data is expected out of the region with CPI expected to come in unchanged at 1.9%.

• The Japanese Yen (JPY) initially strengthened against the USD before the G7 summit as many believed that the participating nations would thoroughly discuss carry trades and JPY weakness. Furthermore, the Japanese Yen, which figured in the majority of banter preceding the Feb 10 meeting, escaped criticism as statements made by the seven rich nations indicated that currencies should reflect the economic fundamentals and JPY recovery should be “recognized by market participants”. Yet markets may interpret the negligence to reprimand recent slides in the Yen may spur on the carry trade. As a result the JPY aired its gains post comments. Overall the JPY traded with a low of 118.22 and a high of 119.58 before closing at 119.17 in the New York session. Looking ahead, the Industrial Production of the month of February is expected to be confirmed at -0.2% whilst plenty of interest will surround BoJ Governor Fukui speech today.

• The Sterling (GBP) rose to a two and a half month high against the Dollar on Friday as markets eagerly await a possible interest rate hike by the BoE next month. Overall, the GBP with a low 1.9786 and a high of 1.9887 before closing at 1.9864 in the New York session. Looking ahead, House Prices are expected to be released out of the UK today (Previous: 1.5%) along with PPI for the month of March expected to remain unchanged at 2.2%.

• The Australian Dollar (AUD) broke through key resistance levels of 0.8300 in the early part of Friday’s Asian session of trading. Overall the Aussie dollar traded with a range of a low 0.8288 and a high of 0.8338 before closing near day highs at 0.8330 in the New ork session.

• Gold (XAU) rallied on Friday on the back of a weaker USD. Gold rose by US$10.20 an ounce to $689.90.

TECHNICAL COMMENTARY

• Euro 1.3575

Initial support at 1.3407 (Apr 11 low) followed by 1.3339 (Apr 9 low). Initial resistance is now located at 1.3581 (Jan 3, 2005 high) followed by 1.3637 (High Close Dec 30, 2004)

• Yen 119.25

Initial support is located at 118.21 (Apr 13 low) followed by 117.87 (38.2% retracement of the 115.15 to 119.55 advance). Initial resistance is now at 119.57 (Apr 13 high) followed by 120.00 (Psychological round number resistance)

• Pound – 1.9880

Initial support at 1.9782 (Apr 13 low) followed by 1.9709 (Apr 11 low). Initial resistance is now at 1.9917 (Jan 23 trend high) followed by 2.0000 (Round number resistance)

• Australian Dollar – 0.8350

Initial support a 0.8233 (April 11 low) followed by 0.8150 (Apr 9 low). Initial resistance is now at 0.8341 (Apr 13 trend high) followed by 0.8376 (Apr open + (Mar range * 0.618)

• Gold – 686.00

Initial support at 670.63 (Apr 9 low) followed by 663.85 (Apr 4 low). Initial resistance is now at 688.64 (Feb 27 high) followed by 700.00 (Psychological round number)