Australian FOREX Daily Outlook 22/01/2007

CURRENCY TRADING SUMMARY –22 JANUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) focus shifted towards consumer confidence which rose from 91.7 to 98.0, and significantly higher than the expected 92.5 for the month of January. As a result, the US Dollar was only initially supported before ending the New York session relatively unchanged against all other majors. As the US economy experienced a number of strong data releases in the later part of the week, the market has already reduced its expectations that the Federal Reserve Bank is likely to cut interest rates. In other markets, the Dow Jones ended slightly weaker dropping by 2.4 points, whilst the NASDAQ was up 8.1 points. Crude oil rose by US$1.51 to US$51.99 a barrel, mainly due to colder weather now being experienced in the US. In related news, OPEC has also lowered its forecast for 2007 due to warm weather, and its members exceeding supply quotas.

• The Euro (EUR) overall traded higher following strong US data being released on Friday. The Euro hit a low of 1.2914 and a high of 1.3002 before closing at 1.2963, the same as the previous day in the New York session.

• The Japanese Yen (JPY) following the Bank of Japan’s decision on Thursday to keep interest rates unchanged the JPY remains under pressure. As the USDJPY continued to trade within a narrow range, reaching a low of 121.10 and a high of 121.49 before closing at 121.28 in the New York session, overall remaining relatively unchanged

• The Sterling (GBP) continued to trade within a tight range reaching a low of 1.9696 and a high of 1.9774 before closing at 1.9733. After initially dropping below 1.9700 as a result of strong data being released from the US. The Sterling rebounded to ensure that it ended relatively close to the previous close. This was largely due to UK retail sales increasing by 1.1%, higher than the estimated 0.5% and significantly higher than the previous 0.2%.

• The Australian Dollar (AUD) traded within a range of 0.7855 as the low and a high of 0.7908 before closing at 0.7897 in the New York session. Looking ahead the market is eagerly anticipating the release of the PPI for the fourth quarter with the expectations being a rise of 0.3% whilst the previous quarter saw an increase of 1.0%. UPDATE: PPI came in at 0.2%, less than the expected 0.3%.

• Gold (XAU) fell amid a lower US dollar and higher oil price saw Gold rise by US$8.30 to $636.40 an ounce.

TECHNICAL COMMENTARY

• Euro 1.2960

Initial support at 1.2865 (Jan 12 low) followed by 1.2821 (61.8% retracement of the 1.2483 to 1.3368 advance). Initial resistance is now located at 1.3002 (Jan 19 high) followed by 1.3016 (Jan 11 high).

• Yen 121.35

Initial support is located at 120.47 (Jan 18 low) followed by 120.06 (Jan 15 corrective low). Initial resistance is now at 121.60 (Jan 18 high) followed by 122.38 (61.8% retracement of the 135.18 to 101.67 decline).

• Pound – 1.9740

Initial support at 1.9636 (Jan 18 low) followed by 1.9571 (Jan 15 low). Initial resistance is now at 1.9780 (Jan 18 high) followed by 1.9849 (Dec 1 2006 high).

• Australian Dollar – 0.7890

Initial support at 0.7855 (Jan 18 low) followed by 0.7812 (Jan 17 corrective low). Initial resistance is now at 0.7908 (Jan 19 high) followed by 0.7922 (Jan 4 high).

• Gold – 635.00

Initial support at 620.4 (Jan 17 corrective low) followed by 610.00 (Jan 12 low). Initial resistance is now at 636.60 (Jan 18 high) followed by 645.0 (Jan 3 reaction high).