Australian FOREX Daily Outlook 25/07/2007

Share markets on drop on Sub-prime concerns, weighing on the greenback. Euro trades at an all time high of 1.3853

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

• U.S. Dollar Trading (USD) continued to trade lower against a basket of currencies, weighed upon by ongoing fears of worsening credit and housing woes, as USD bears continued to avoid long dollar positions. In U.S. share markets the NASDAQ was down by 50.72 points (-1.89%) whilst the Dow Jones also fell by 226.47 (-1.62%). Crude oil fell on Tuesday by US$1.33 to US$73.56 a barrel, as Iran vowed to boost supplies. Looking ahead with so much emphasis on the housing sector plenty of focus will surround the release of existing home sales with forecasts at 5.87 mln for the month of June (Previous: 5.99 mln)

• The Euro (EUR) the Euro traded at a fresh record high against the USD. In data specific news the Euro was also supported by a positive Industrial Production figure, gaining on the back of a broadly weaker dollar despite a widening of the current account deficit and a drop in PMI manufacturing, which did little to alter the outlook of EZ growth. Overall the EURUSD traded with a range of a low 1.3799 and a high of 1.3853 before closing the day at 1.3821 in the New York session.

• The Japanese Yen (JPY) continued its recent rallies against the USD, with the USDJPY pair touching a two month low on uncertainty in the US credit markets. Overall the USDJPY traded with a range of a low 120.03 and a high of 121.14 before closing the day at 120.21 in the New York session. Looking ahead plenty of focus will surround the release of the Trade Balance for the month of June, with markets expected a figure 948.5 bln significantly higher than the previous figure of 389.5 bln. UPDATE: Trade Balance at 1227.1 bln

• The Australian Dollar (AUD) came within sight of an 18 ½ year high once again before pairing off its gains. The AUD traded with range of a low 0.8807 and a high of 0.8862 before closing the day at 0.8818 in the New York session. Wednesday will see plenty of focus on key inflationary measures, as CPI is forecasted to come in at 1% up on the previous 0.1% for the second quarter. The Kiwi dollar (NZD) continued on its upward rise, gaining 0.1% trading above 0.8100 levels during the Asian session for the first time since floating in 1985.

• The Canadian Dollar (CAD) traded lower against the dollar with reports showing Canadian retail sales in May had the biggest increase in nearly a decade, pushing the greenback to a 30-year low against the Canadian. Overall the USDCAD traded with a low 1.0342 and a high of 1.0473 before closing the day at 1.0361 in the New York session.

• The Turkish Lira (TRY) firmed 1.4% to new six years high as investors bet the central bank will not intervene to stem the strong rise in the Lira. Lira closed at 1.2340 to the dollar on the inter-bank market.

• Gold (XAU) rose by US$3.30 an ounce to US$684.80 supported by safe haven flows.

CURRENCY PAIR IN FOCUS

• The Sterling (GBP) once again traded at a fresh 26 year high against the USD reaching 2.0653. Poor reading in CBI retail sales did very little to curb any positive sentiment on cable. Overall, the GBPUSD trade with a range of a low 2.0621 and a high of 2.0653 before closing the day at 2.0589 in the New York session

TECHNICAL COMMENTARY

• Euro 1.3815

Initial support at 1.3730 (July 11 low) followed by 1.3592 (Jul 10 low). Initial resistance is now located at 1.3853 (Jul 24 trend high) followed by 1.4000 (Psychological round resistance).

• Yen 120.25

Initial support is located at 120.15 (May 16 low) followed by 119.66 (50% retracement of the 115.15 to 124.17 advance). Initial resistance is now at 121.70 (Jul 23 high) followed by 122.62 (Jul 13 high)

• Pound – 2.0605

Initial support at 2.0531 (Jul 23 low) followed by 2.0460 (Jul 18 low). Initial resistance is now at 2.0656 (Jul 24 trend high) followed by 2.0683 (Intraday Channel Resistance)

• Australian Dollar – 0.8820

Initial support a 0.8780 (Jul 23 low) followed by 0.8717 (Jul 17 low). Initial resistance is now at 0.8867 (Jul 24 trend high) followed by 0.8919 (1.00 progression of 0.8163-0.8749 from 0.8333)

• Gold – 680.70

Initial support at 663.00 (Jul 17 low) followed by 671.60 (Jul 19 low). Initial resistance is now at 687.80 (Jul 20 high) followed by 690.90 (May 7 low)