Australian FOREX Daily Outlook 16/07/2007

Poor US Retail Sales a cause for further dollar weakness. Euro trades at a new all time high of 1.3815. New Zealand and EZ to release CPI figures.

CURRENCY TRADING SUMMARY –16 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) eased against a basket of currencies, trading flat versus a select few. With Retail Sales for the month of June coming in significantly worse than expected the at -0.4% (Forecast: 0.2%), the USDbecame subject to heavy selling pressure, before losses were capped by an unexpectedly high reading in Consumer Confidence with the Michigan Survey, released at 92.4 (Forecast: 86). Analyst reported that the preliminary July consumer sentiment index was the highest since January, yet still did little to change the perception of interest rates in the U.S., with many expecting the cash target to remain on hold for 2007. In U.S. share markets the NASDAQ was up 5.27 points (+0.2%) whilst the Dow Jones also gained 45.52 points (+0.33%). Crude oil continued to move on the upside trading above 11 month highs recently set, at US$73.97 a barrel, up US$1.47. Looking ahead, key data out of the U.S will be released in the form of the NY Fed Manufacturing Survey, which is expected to be released with a figure of 18.5 (Previous: 25.75)

• The Euro (EUR) once again traded at a fresh record high breaking key 1.3800 levels to trade a high of 1.3815, before the currency failed to sustain such levels. In other News, the French government renewed it attacks on the Euro’s strength, which has recently exposed weakness in the French economy. Overall the EURUSD traded with a range of a low 1.3764 and a high of 1.3815 before closing the day at 1.3785 in the New York session. Looking ahead, plenty of focus will surround the Core CPI release out of the EZ today, with markets forecasting figures at 0.1%/1.9% for the m/m and y/y respectively (Previous: 0.2%/1.9%).

• The Japanese Yen (JPY) gained against USD on Friday despite easing concerns of the Sub Prime mortgage market. In other news, Analysts said gains in U.S. stocks have partly supported the dollar against the yen and minimized the impact of earlier news about Iran on the currency pair. A report on Thursday suggested Iranian officials had asked Japanese buyers of its crude oil to switch payment to Yen from U.S. dollars as it faces growing pressure from the West over its nuclear program. Overall the USDJPY traded with a range of a low 121.92 and a high of 122.62 before closing the day at 122.04 in the New York session. Looking Ahead, Japanese markets will be closed on Monday for Marine Day.

• The Sterling (GBP) touched a fresh 26 year high following a poor reading in June’s U.S Retail Sales figure. In UK specific events, Bank of England Monetary Policy Committee member Charles Bean said on Friday that he supported the idea of inflation targeting but his speech didn’t address the current monetary policy outlook. Overall the GBPUSD traded with a range of a low 2.0263 and a high of 2.0366 before closing the day at 2.0329 in the New York session.

• The Australian Dollar (AUD) was one of the biggest movers on Friday largely aided by a sturdy reading in neighboring New Zealand Retail Sales. As a result the AUD tested key psychological levels of 0.8700. Overall the AUDUSD traded with a range of a low 0.8656 before closing the day at 0.8698. Looking ahead although Monday is proving to be a quiet day for Australian Markets, plenty of attention will be directed to New Zealand’s release of CPI for the second quarter with forecast at 0.8%/1.8% for the m/m and y/y respectively (Previous: 0.5%/2.5%)UPDATE: New Zealand CPI at 1.0%/2.0%

• The Canadian Dollar (CAD) The Canadian dollar was lower against the greenback on Friday morning, but robust oil prices and merger-related inflows kept the currency within reach of the 30-year high it hit recently. Overall the USDCAD traded with a range of a low 1.0447 and a high of 1.0497 before closing the day at 1.0479 in the New York session.

• Gold (XAU) eased amidst profit taking yet a weakening dollar and firmer oil prices limited losses and traders said the yellow metal should rise further in the near term. Gold traded with a low of 663.60 and a high of 668.90.

TECHNICAL COMMENTARY

• Euro 1.3775

Initial support at 1.3730 (July 11 low) followed by 1.3592 (Jul 10 low). Initial resistance is now located at 1.3815 (Jul 13 trend high) followed by 1.3852 (Open + (Last weeks range * 1.618).

• Yen 121.85

Initial support is located at 120.76 (Jun 8 reaction low) followed by 120.15 (May 16 low). Initial resistance is now at 123.68 (Jul 7 high) followed by 123.96 (Jun 25 high)

• Pound – 2.0330

Initial support at 2.0243 (Jul 11 low) followed by 2.0120 (Jul 10 low). Initial resistance is now at 2.0368 (Jul 13 trend high) followed by 2.0500 (Psychological resistance)

• Australian Dollar – 0.8695

Initial support a 0.8565 (Jul 10 low) followed by 0.8487 (Jul 2 low). Initial resistance is now at 0.8700 (Round number resistance) followed by 0.8731 (0.8163 plus 0.7414-0.7982)

• Gold – 667.30

Initial support at 658.90 (Jul 10 low) followed by 653.80 (Jul 9 low). Initial resistance is now at 669.40 (Jul 12 high) followed by 674.19 (Jun 4 low)