Australian FOREX Daily Outlook 25/10/2007

US Housing Sector continues to slump. Markets await Japanese CPI data.

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

·U.S. Dollar Trading (USD) eased against a basket of currencies on persisting bearish sentiment on the dollar. In data news, US existing home sales failed to give any indication that the worst of the housing slump had surpassed coming in at 5.04 mio for the month of September (Previous revised lower to 5.48 mio). In U.S. share markets the NASDAQ was down 24.5 points (-0.88%) whilst the Dow Jones was also down by -0.98 points (-0.01%). Crude oil rose by US$1.83 a barrel to US$87.10 as stocks in the U.S fell by 5.3 million barrels last week. Looking ahead, Durable goods for the month of September will be made public on Thursday with economists expecting that the figure will be at 1.5% up from the previous of -4.9%. Further housing data will be in focus also as New Home Sales for the month of September is forecasted to show a decline to 780k, down from the previous 795k.

·The Euro (EUR) gained against the USD despite sustaining pressure versus the JPY. In market unwinding EURJPY crosses, capped it’s loses on buoyant data out of the Eurozone. Current Account for the month of August surprised on the upside, coming in at 3.8 bln, whilst mixed data was seen in PMI Manufacturing and Non-Manufacturing. Overall the EURUSD traded with a low of 1.4188 and a high of 1.4268 before closing the day at 1.4257 in the New York session.

·The Japanese Yen (JPY) rose against the dollar and Euro as speculation increased that a housing slump will weaken the U.S. economy and spur investors to dump risky bets funded by loans in Japan. Overall the USDJPY traded with a low of 113.81 and a high of 114.96 before closing the day at 114.12 in the New York session. Focus now shifts to Friday CPI release.

·The Sterling (GBP) continued to rise against the dollar on speculation the Federal Reserve will cut interest rates again this year while the Bank of England stays on hold. Overall the GBPUSD traded with a low of 2.0428 and a high of 2.0517 before closing the day at 2.0494 in the New York session.

·The Australian Dollar (AUD) gained although Headline CPI data was down on expectations. Instead plenty of attention was placed on the RBA trimmed mean CPI which surprised on the upside, giving further scope of interest rate hikes by the central bank before year end. Overall the AUDUSD traded with a low of 0.8937 and a high of 0.9047 before closing the day at 0.9003 in the New York session.

·The Canadian Dollar (CAD) eased from 33 year highs as investors sold stocks on growing concerns of growing US economic weakness. Overall the USDCAD traded with a low of 0.9646 and a high of 0.9734 before closing the day at 0.9705 in the New York session.

·The Polish Zloty (PLN) rose to near the highest in almost 5 1/2 years as the Citizens’ Platform party began talks on forming a coalition that may strengthen efforts to cut bureaucracy and deepen relations with the European Union. Overall the USDPLN traded with a low of 2.5597 and a high of 2.5797 in the New York session.

·Gold (XAU) eased during the London metals exchange, before rebounding on stronger oil prices. Overall XAU traded with a low of 754.50 and a high of 763.40

TECHNICAL COMMENTARY

·Euro 1.4255

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 114.05

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 – 2.0480

Initial support at 2.0304 (Oct 23 low) followed by 2.0259 (Oct 22 low). Initial resistance is now at 2.0574 (Oct 22 high) followed by 2.0624 (Jul 26 high)

• Australian Dollar – 0.9020

Initial support a 0.8856 (Oct 23 low) followed by 0.8749 (Oct 22 low). Initial resistance is now at 0.9013(Oct 16 high) followed by 0.9078 (Oct 15 high).

• Gold – 763.00

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)