Australian FOREX Daily Outlook 16/10/2007

USD drop on the back of softer stock prices. Gold at 27 year high

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

·U.S. Dollar Trading (USD) was mixed against a basket of currencies overnight as a drop in stock prices attributed to further downside moves in the currency. In data news, the NY Fed Manufacturing survey did little to cap any further losses in the dollar as the figure for the month of October was released well above expectations at 28.75 (Forecast: 13). In U.S. share market the NASDAQ was down 25.36 points (-0.91%) whilst the Dow Jones -108.28 points (-0.77%). Crude oil surged on Monday gaining by US$2.44 a barrel to US$86.13. Looking ahead, key data out of the US today, in the form of Industrial Production and Chairman Bernanke’s Speech to the Economic Club of NYC will prove interesting.

·The Euro (EUR) gained overnight as ECB president Trichet indicated that the central bank had not altered its economic forecasts, fuelling expectations the interest rates will head higher early next year. In other news, EU officials’ rhetoric regarding a strong currency had gained in momentum on Monday leading up to the weekends G7 summit. Overall the EURUSD traded with a low of 1.4162 and a high of 1.4243 before closing the day at 1.4199 in the New York session. Looking ahead, inflation data out of the EZ is scheduled on Tuesday with forecasts that the figure will be release at 1.9% for the month of September and 2.1% for the year on year.

·The Japanese Yen (JPY) was relieved of plenty of its pressure after Citigroup Inc., the largest U.S. bank, said losses will continue to hurt the financial industry, stoking concern credit-market turmoil may flare up again. As expected the JPY gained significantly against a high yielding currencies, pushing the NZD and the AUD lower. Overall the USDJPY traded with a range of a low 117.11 and a high of 117.95 before closing the day at 117.23 in the New York session.

·The Sterling (GBP) gained against the USD as reports showed that UK house prices had risen at highest level in six months adding to confidence in the UK economy. Overall the GBPUSD traded with a low of 2.0321 and a high of 2.0435 before closing the day at 2.0422 in the New York session. Looking ahead, Tuesday sees the release of UK CPI data, with the consensus at 0.2%/1.9% for the m/m and y/y respectively.

·The Australian Dollar (AUD) eased overnight as Japanese crosses were broadly sold. Overall the AUD traded with a low of 0.8972 and a high of 0.9078 before closing the day at 0.8983 in the New York session.

·Gold (XAU) rose to the highest since 1980 as record energy costs and a weakening dollar boosted the appeal of the precious metal as a hedge against inflation. XAU traded with a range of a low 748.05 and a high of 760.00.

TECHNICAL COMMENTARY

·Euro 1.4195

Initial support at 1.4094 (Oct 10 low) followed by 1.4015 (Oct 9 low). Initial resistance is now located at 1.4241 (Oct 11 high) followed by 1.4282 (Oct 1 trend high)

·Yen 117.25

Initial support is located at 117.02 (Oct 11 low) followed by 116.28 (Oct 4 low). Initial resistance is now at 117.79 (Oct 11 high) followed by 117.88 (50% retracement 124.15 to 111.61 decline).

• Pound – 2.0415

Initial support at 2.0247 (Oct 12 low) followed by 2.0188 (50% retracement of the 1.9880 to 2.0495 advance). Initial resistance is now at 2.0366 (Oct 12 high) followed by 2.0423 (Oct 11 high)

• Australian Dollar – 0.8975

Initial support a 0.8953 (Oct 12 low) followed by 0.8914 (Oct 9 low). Initial resistance is now at 0.9059 (Oct 11 trend high) followed by 0.9118 (0.8052 plus 1.618 of 0.7676 – 0.8335).

• Gold – 755.30

Initial support at 741.40 (Oct 11 low) followed by 737.70 (Oct 10 low). Initial resistance is now at 753.70 (Oct 11 trend high) followed by 758.50 (This week’s open + (last week’s range * 0.618)