Australian FOREX Daily Outlook 17/04/2007

Appetite for risk remains as G7 summit approves carry trades. Positive economic data does little to stop a weakening greenback. CPI set for release out of US and UK

CURRENCY TRADING SUMMARY –17 APRIL 07 (23:30GMT)

• U.S. Dollar Trading (USD) suffered in the first day post G7 summit following reference to an imminent rate cut and the significant US trade imbalance. Despite retail sales coming in better than expecting at 0.7% with 0.6% the figure that markets had expected markets continued to remain bearish on the Greenback. Other data out of the US included the NY Fed Manufacturing survey which disappointed in its 3.8 index, whilst positive data in the form of TIC flows did little to support the dollar despite a sturdy figure of 94.5 bln. In US share markets the NASDAQ rose by 26.39 points (1.06%) whilst the Dow Jones was also up by 108.33 points (0.86%) giving further indication of the recovering equity markets. Crude oil fell by US$0.02 a barrel to US$63.61 to end relatively unchanged. Looking ahead, a heavy data day is expected with the release of the CPI expected to remain unchanged at 0.2% for the month of March, and Industrial Production expectant of figure of 0.0% (Previous: 1.0%). Finally, with so much emphasis being placed on the slowing housing sector, Housing Starts will be watched eagerly with markets expecting a figure of 1500k down on the previous 1525k.

• The Euro (EUR) received strength on the back of official comment made by the ECB that the growth was stable and inflation was well controlled. Furthermore officials insinuated that the Euro was becoming increasingly more attractive for reserves. In other news, Core CPI came in on consensus at 1.9%. Overall the Euro traded with a range of a low 1.3536 and a high of 1.3578 before closing the day at 1.3546 in the New York session. Looking ahead the German ZEW survey is scheduled for release today with markets expecting a figure of 10.0 up on the previous month of 5.8. Other data comes in the form of the Traded Balance for the month of Feb with the previous -7.8 bln markets are awaiting a figure of -5 bln.

• The Japanese Yen (JPY) fell to a fresh record low against the Euro for the fifth consecutive day. The EURJPY reached a record high of 162.43 on Monday as the G7 summit did not raise any concerns over carry trades, fuelling further activity. Overall the JPY traded with a range of a low 118.98 and a high of 119.87 before closing at 119.79 in the New York session. Looking ahead Consumer Confidence is made public today with markets predicting a figure of 47.8 down on the previous 48.6.

• The Sterling (GBP) found support as a high yielding currency. More so the recent comments made by BoE Governor that the housing sector was slowing were nullified on the back of strong House Prices which added further cause to a future rate hike. Overall, the GBP traded with a low of 1.9857 and a high of 1.9940 and 1.9898. Looking ahead, CPI is expected to be released at an unchanged figure of 2.8%.

• The Australian Dollar (AUD) was subject to plenty technical trading with little data. Overall, the AUD traded in range of a low 0.8313 and a high of 0.8357 before closing at 0.8320 in the New York session.

• The Turkish Lira (TRY) strengthened against the USD as appetite for risky trades were fueled by the G7.

• Gold (XAU) gained on the back of broadly weaker greenback. Gold rose by US$4.60 an ounce to US$694.50

TECHNICAL COMMENTARY

• Euro 1.3535

Initial support at 1.3480 (Apr 13 low) followed by 1.3407 (Apr 11 low). Initial resistance is now located at 1.3578 (Apr 16 trend high) followed by 1.3637 (High Close Dec 30, 2004)

• Yen 119.60

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 119.89 (Apr 16 high) followed by 120.00 (Psychological round number resistance)

• Pound – 1.9895

Initial support at 1.9854 (Apr 16 low) followed by 1.9782 (Apr 13 low). Initial resistance is now at 1.9941 (Apr 16 trend high) followed by 2.0000 (Round number resistance)

• Australian Dollar – 0.8320

Initial support a 0.8286 (April 16 low) followed by 0.8233 (Apr 11 low). Initial resistance is now at 0.8360 (Apr 16 trend high) followed by 0.8376 (Apr open + (Mar range * 0.618)

• Gold – 688.40

Initial support at 676.80 (Apr 13 low) followed by 670.63 (Apr 9 low). Initial resistance is now at 691.26 (Apr 16 high) followed by 700.00 (Psychological round number)