Australian FOREX Daily Outlook 17/07/2007

USD continues to remain bearish on poor data. Commodity bloc currencies the biggest gainers overnight.

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

• U.S. Dollar Trading (USD) was battered across the board against other majors as investor’s pre-empted poor data out of the U.S. this week, showing declines in inflation. Some analysts say weakness in the housing sector combined with a slowdown in inflation may even lead the Federal Reserve to reduce interest rates early next year. Markets are currently pricing in about a one-in-six chance that the Fed will cut interest rates by a quarter percentage point in 2007. Adding further emphasis on Wednesdays trading session, with CPI, housing construction and Chairman Bernanke semi-annual testimony all scheduled. In U.S. share markets, the NASDAQ dropped -9.67 points (-0.36%) whilst the Dow Jones rose by 43.73 points (+0.31%). Crude oil rose by US$0.22 a barrel to US$74.15. Looking ahead key data will be released in the form of PPI, Capital Net Flows, and Industrial Output on Tuesday.

• The Euro (EUR) traded near record highs against the USD once again, as outlook on the EZ’s currency remains bullish pricing in future rate hikes with Core CPI data for the month of June coming in slightly better than expectations. Overall the EURUSD traded with a range of a low 1.3760 and a high of 1.3804 before closing the day at 1.3783 in the New York session. Looking ahead, German ZEW survey will be released on Tuesday with forecasts of 88 down from the previous 88.7

• The Japanese Yen (JPY) was down 0.1% against the USD, having recovered earlier losses from earthquakes in north western Japan that had sparked Yen selling. Overall the USDJPY traded with a range of a low 121.55 and a high of 122.19 before closing the day at 121.81 in the New York session.

• The Sterling (GBP) continued to gain against a broadly weaker dollar trading above 2.04 levels for the first time in 26 years. Overall the GBPUSD traded with a range of a low 2.0328 and a high of 2.0404 before closing the day at 2.0370 in the New York session. Looking ahead key data will be released in the form of UK CPI, and Retail Sales on Tuesday.

• The Australian Dollar (AUD) gained on the back of moves in the Kiwi Dollar to comfortably break and trade above key levels of 0.8700. Overall the AUDUSD traded with a range of a low 0.8698 and a high of 0.8762 before closing the day at 0.8714. Looking ahead, RBA Governor Stevens is scheduled to talk on Tuesday.

• The Canadian Dollar (CAD) U.S. dollar fell sharply to a 30-year low against the Canadian dollar on Monday, after dealers targeted automatic sell orders in quiet trade. The U.S. dollar tumbled to lows below C$1.0420, falling more than 30 ticks in a matter of minutes. The pair is down 0.4 percent from late Friday. Overall the USDCAD traded with a low of 1.0416 and a high of 1.0493 before closing the day at 1.0426 in the New York session.

• Gold (XAU) traded just under a five week high with a low of 663.80 and a high of 668.70.

CURRENCY PAIR IN FOCUS

• CAD/JPY rose to 117.00 levels following sharp fall of USDCAD, after dealers targeted automatic sell orders in quiet trade.

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 122.00

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 – 2.0360

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 – 0.8715

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 – 665.30

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)