Australian FOREX Daily Outlook 24/01/2007

CURRENCY TRADING SUMMARY –24 JANUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) fell against major currencies reaching a 14 year low against the sterling. The Richmond Fed survey was released coming in worse than expected down -11 significantly lower than forecasted 2. With further economic data due out at the end of the week, the market continues to watch with interest. In other markets the Dow Jones was up 56.64 points (0.45%) and the NASDAQ was up 0.34 points (0.01%). Crude Oil rose by US$2.26 higher to US$54.84 a barrel.

• The Euro (EUR) strengthened significantly against the USD, trading within a low of 1.2928 and high of 1.3045 before closing at 1.3022 at the end of the New York session. The movement was caused by healthy Eurozone economic data and comments made by central bankers indicating interest rates will continue to rise. ECB officials believe that if growth remains solid in the region, interest rates may be lifted from the current 3.5%. Industrial orders rose 1.4% higher than the expected 1%, and significantly higher than the previous -0.5% for the month of November. In other news, the Euro climbed to a record high against the yen at 158.35, as investors once again sought high yielding currencies.

• The Japanese Yen (JPY) continues to experience pressure by dropping slightly against the USD, closing in on a near four year high of 121.87. Overall the JPY traded within a low of 121.11 and a high of 121.75 before closing at 121.65. Initially the Dollar fell, but interest saw the market buy back the dollar following the Bank of Japan’s Governor Fukui’s comments. Gov. Fukui told Reuters higher rates could ultimately benefit the Japanese economy, but are likely to proceed with caution whilst economic data remains mixed. Fukui would not be drawn into the timing of any move, and remained skeptical that the gap between BoJ board members could be narrowed in the near the future.

• The Sterling (GBP) continued to strengthen against the USD. The Sterling reached an astounding 14 year high reaching above $1.99, and within sight of the psychologically key $2.00 level. The trend saw investors looking to capitalize on strong returns delivered by high UK interest rates at 5.25%. The strength in the pound was also aided by the Bank of Englands Governor King talking of rate hikes again this year if CPI remains strong. Overall GBPUSD traded within range of 1.9756 to 1.9917 before closing at 1.9826 in the New York session. Looking ahead, interest surrounds the release of BoE minutes which is scheduled to be released later on today.

• The Australian Dollar (AUD) continues to gain strength trading within a range of a low of 0.7874 and a high of 0.7973 before closing at 0.7926 in the New York session higher than the previous day. UPDATE: the CPI for the fourth quarter was released this morning coming in at -0.1% lower than the expected 0.2%, causing a significant decline in the AUDUSD.
• Gold (XAU) continues to strengthen as a result of weaker USD and firmer Oil prices, jumping 2% to a seven-week high. Gold was up by US$12.40 an ounce to $646.5.

TECHNICAL COMMENTARY

• Euro 1.3025

Initial support at 1.2928 (Jan 23 low) followed by 1.2897 (Jan 18 low). Initial resistance is now located at 1.3057 (38.2% retracement of the 1.3368 to 1.2865 decline) followed by 1.3117 (50% retracement of the 1.3368 to 1.2865 decline).

• Yen 121.75

Initial support is located at 121.09 (Jan 19 low) followed by 120.47 (Jan 18 low). Initial resistance is now at 122.38 (61.8% retracement of the 135.18 to 101.67 decline) followed by 122.88 (Dec 13 2002 high).

• Pound – 1.9815

Initial support at 1.9752 (Jan 23 low) followed by 1.9694 (Jan 19 low). Initial resistance is now at 1.9917 (Jan 23 trend high) followed by 2.0 (Psychological round number resistance)

• Australian Dollar – 0.785

Initial support at 0.7855 (Jan 18 low) followed by 0.7812 (Jan 17 corrective low). Initial resistance is now at 0.794 (Jan 23 high) followed by 0.7982 (Jan 3 trend high).

• Gold – 645.7

Initial support at 632.20 (Jan 22 low) followed by 623.93 (Jan 18 low). Initial resistance is now at 648.20 (Jan 23 high) followed by 649.95 (Dec 1 high)