Australian FOREX Daily Outlook 23/10/2007

Japanese Yen pushes majors down on drop in stock prices and G7 summit, USD dollar finds relief.

CURRENCY TRADING SUMMARY –23 OCTOBER 2007 (00:30GMT)

·U.S. Dollar Trading (USD) rallied against a number of majors, following through from the G7 summit over the weekend. Despite the inability of officials to address the recent USD weakness, moves were triggered by a common voice amongst major economies, calling for a stronger Chinese Yuan, which boosted its proxy Japanese Yen, relieving the dollar of much of its recent pressures. In U.S. share markets the NASDAQ was up 28.77 points (+1.06%) whilst the Dow Jones was also up 44.95 points (+0.33%). Crude oil fell by US$1.04 a barrel to US$87.56 on news of a potential cease fire between Turkish troops and Kurdish rebels. Looking ahead, Richmond Manufacturing survey for the month of October is scheduled for release in which analysts have forecasted a figure of 8 lower than the previous 14.

·The Euro (EUR) eased on Tuesday, losing ground on a revived dollar. Although plenty of rhetoric ahead of the G7 summit surrounded the recent strength in the Euro, ECB officials did not express any worries, as it was viewed to resemble economic fundamentals. In fact, the Euro fell on the back of a surging Japanese Yen (proxy trade for the Chinese Yuan) prompting traders to unwind high yielding carry trades. Overall the EURUSD traded with a low of 1.4126 and a high 1.4329 before closing the day at 1.4157 in the New York session.

·The Japanese Yen (JPY) surged across the board following a strong call for the CNY to appreciate in value. Much of the communiqué (at the G7 summit) from officials addressed the concerns of the CNY causing inequality in respective trade balances. Furthermore, global stocks plunged on Friday, and a follow through was seen in Asian stocks causing a risk aversion sentiment amongst traders. Overall the USDJPY traded with a low of 113.25 and a high of 114.32 before closing the day at 114.10 in the New York session. Focus now shifts to Trade Balance and inflationary measures in the later part of the week.

·The Sterling (GBP) eased on a broadly stronger dollar, cross yen sell off and ongoing liquidity concerns in the UK. Overall the GBPUSD traded with a low of 2.0259 and a high of 2.0548 before closing the day at 2.0286 in the New York session. Looking ahead CBI Industrial Trends (orders) survey may prove to be the only highlight out of the UK this week, with economists forecasting a figure of 4 for the month of October (Previous: 6).

·The Australian Dollar (AUD) was choppy throughout the day, succumbing to a Yen sell off during the Asian session. However, any further down side moves were limited with PPI data for the third quarter coming in better than forecast at 1.1%. Overall the AUDUSD traded with a range of a low 0.8752 and a high of 0.8916 before closing the day at 0.8815

·The Canadian Dollar (CAD) eased considerably versus the USD with comments out of the G7 was compounded following the admission by the BoC that strength in the Canadian Dollar may give rise to worries amongst investors. The USDCAD traded with a low of 0.9662 and a high of 0.9824 before closing the day at 0.9814 in the New York session.

·Gold (XAU) paired its gains following a USD correction. XAU traded with a low of 745.80 and a high of 768.10.

TECHNICAL COMMENTARY

·Euro 1.4190

Initial support at 1.4125 (Oct 22 low) followed by 1.4094 (Oct 10 low). Initial resistance is now located at 1.4350 (Oct 22 trend high) followed by 1.4369 (1.0410 plus 1.3360 – 1.3719)

·Yen 114.35

Initial support is located at 113.26 (Oct 22 low) followed by 112.61 (Sept 10 reaction low). Initial resistance is now at 115.72 (Oct 19 high) followed by 116.64 (Oct 18 high).

• Pound – 2.0350

Initial support at 2.0259 (Oct 22 low) followed by 2.0247 (Oct 12 low). Initial resistance is now at 2.0574 (Oct 22 high) followed by 2.0624 (Jul 26 high)

• Australian Dollar – 0.8875

Initial support a 0.8749 (Oct 22 low) followed by 0.8611 (Sept 26 low). Initial resistance is now at 0.8994 (Oct 19 high) followed by 0.9013 (Oct 16 high).

• Gold – 755.30

Initial support at 745.35 (Oct 22 low) followed by 741.40 (Oct 11 low). Initial resistance is now at 771.50 (Oct 19 trend high) followed by 774.90 (This weeks open + (last weeks range * 0.618)