Australian FOREX Daily Outlook 25/05/2007

USD finds support as New Home Sales grew at its fastest rate in 14 years. Japanese CPI scheduled for release.

CURRENCY TRADING SUMMARY –25 MAY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) rebounded on Thursday as reports showed that US New Home Sales in April showed growth at its fastest rate in 14 years at 0.981 mln (Forecast: 0.86 mln) with the previous revised lower at 0.844. The data reinforced views that the Fed will not look to cut interest rates anytime soon. In other key data released on Thursday, Durable Goods disappointed coming in worse than expected but was shrugged off as the previous was revised up and markets were more concerned with the New Home sales data providing support to the greenback. In U.S. share markets, the NASDAQ dropped by 39.13 points (-1.52%) whilst the Dow Jones also fell by 84.52 points (-0.62%). Crude Oil rose by US$0.29 a barrel to US$64.47. Looking ahead, with such a buoyant figure for New Home Sales being public on Thursday, attention will now shift to the release of April’s Existing Home Sales figure. Markets are expecting a figure of 6.14 mln higher than the previous 6.12 mln.

• The Euro (EUR) eased on the back of a broadly stronger dollar despite the German IFO survey unchanged from the previous month at 108.6. The Euro was down 0.25%, the lowest level since April 11. Overall, the EURUSD traded with a low 1.3415 and a high of 1.3462 before closing the day at 1.3434 in the New York session. Looking ahead Gfk Consumer confidence is released on Friday with market expectations of 6 for the month of June (Previous: 5.5)

• The Japanese Yen (JPY) slid against the dollar on Thursday following sturdy housing data out of the U.S. in other news, Japanese Vice-Finance Minister Hideto Fujii said the ministry had no plans to drastically change the currency composition of Japan’s foreign exchange reserves. Overall the USDJPY traded with a range of a low 121.24 and a high of 121.68 before closing the day at 121.40 in the New York session. Looking ahead, key data in the form of Core CPI m/m of April will be sure to move markets today as expectations are of -0.1% (Previous: -0.1%) UPDATE: Core CPI -0.1%

• The Sterling (GBP) also eased against the USD simultaneously reaching a fresh five-week high against the EUR as expectations of higher interest rates on the back of positive Manufacturing data. Overall the GBPUSD trade with a range of a low 1.9832 and a high of 1.9889 before closing the day 1.9858 in the New York session. In key data release, UK GDP (Q1) will be released to the public today with analysts forecasting a figure of 0.7% for the q/q same as previous.

• The Australian Dollar (AUD) traded in a tight range before feeling the pinch on the back of a buoyant USD. Overall the AUD traded with a range of a low 0.8192 and a high of 0.8236 before closing the day near lows at 0.8194 in the New York session.

• The Canadian Dollar (CAD) hit a 29.5 year high versus the US currency as momentum helped erase a brief slip in the wake of US economic data. Overall the USDCAD traded with a range of a low 1.0805 and a high of 1.0850 before closing the day at 1.0842 in the New York session.

• Gold (XAU) fell by US$9.30 an ounce to US$653.30 on Thursday.