Australian FOREX Daily Outlook 17/05/2007

Sturdy House Prices and Industrial Production give support to USD rally. Heavy data day ahead for Japan, with GDP and BoJ rate announcement.

CURRENCY TRADING SUMMARY –17 MAY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) rallied broadly overnight having hit a one-week low against the Euro. With recent concerns of a slowing housing sector in the U.S., the dollar was supported by reports indicating stronger than expected growth at 1.528 mio (Prior: 1491 revised Forecast: mio) for the month of April. Furthermore, Industrial Production also came in better than expected showing at 0.7 (Forecast: 0.3) for the month of April. In U.S. share markets the NASDAQ rose by 22.13 (+0.88%) and the Dow Jones also rose by 103.69 (+0.77%). Crude oil eased by US$0.62 a barrel to US$62.55 as further as Nigerian instability diminished. Key data in the shape of Philly Fed and Michigan Sentiment set for release with expectations of 3.0 (Prior: 0.2) and 86.7 (Prior: 87.1) respectively.

• The Euro (EUR) eased on Wednesday, on the back of positive US data. Despite inflationary data in the form of Eurozone CPI being released better than expected at 1.9% for the month April (Forecast: 1.8%). Overall the EUR traded with a range of a low 1.3504 and a high of 1.3610 before closing the day at 1.3519 in the New York session. Looking ahead the ECB monthly report will be made public on Thursday.

• The Japanese Yen (JPY) hit a three-month low against the USD ahead of data out on the Thursday that is expected to support the view that the BoJ will keep rates unchanged. Overall the JPY traded with a range of a low 120.15 and a high of 120.83 before closing the day at 120.75 in the New York session. Looking ahead, GDP data for the first quarter with expectations that 0.7% (Prior: 1.3%) along with the Reuters Tankan Survey which saw a previous figure of 28. UPDATE: GDP Q1 q/q: 0.6% GDP deflator Q1 -0.2% (Forecast: -0.4%)

• The Sterling (GBP) hit two month low against the Euro and fell against the USD on Wednesday as the BoE inflation report gave no confirmation that British Interest rates would rise again. Overall, the GBP trade with a range a low 1.9759 and a high of 1.9873 before closing the day at 1.9782 in the New York session.

• The Australian Dollar (AUD) eased in the early part of the European session, before failing to regain any of its losses in the U.S. session of trading on the back of a rebounding USD. Overall the AUD traded with a range of a low 0.8236 and a high of a 0.8340 before closing the day at 0.8238 near day lows in the New York session.

• The Turkish Lira (TRY) strengthened to new 2007 high against the dollar on Wednesday, supported by foreign cash inflow which also gave a boost to shares and bonds.

• Gold (XAU) was sold of as investors sought to square profits on the back of a stronger USD and lower Oil prices. Gold fell by US$13.10 an ounce to US$661.50

TECHNICAL COMMENTARY

• Euro 1.3530

Initial support at 1.3462 (May 11 low) followed by 1.3371 (38.2% retracement of the 1.2865 to 1.3683 advance). Initial resistance is now located at 1.3612 (May 16 high) followed by 1.3629 (May 7 high)

• Yen 120.85

Initial support is located at 120.15 (May 16 low) followed by 119.47 (May 11 low). Initial resistance is now at 121.65 (Feb 22 reaction high) followed by 122.10 (Feb 12 reaction high)

• Pound – 1.9780

Initial support at 1.9746 (May 15 low) followed by 1.9659 (50% retracement of the 1.9184 to 2.0134 advance). Initial resistance is now at 1.9894 (38.2% retracement of the 2.0134 to 1.9746 decline) followed by 1.9964 (May 10 high)

• Australian Dollar – 0.8260

Initial support a 0.8230 (May 11 low) followed by 0.8204 (May 7 low). Initial resistance is now at 0.8362 (Apr 26 high) followed by 0.8383 (Apr 23 high)

• Gold – 663.60

Initial support at 656.23 (50% retracement of 633.00 to 693.80 advance) followed by 632.80 (Mar 6 low). Initial resistance is now at 675.05 (May 14 high) followed by 680.9 (May 10 high)