Australian FOREX Daily Outlook 28/05/2007

US Existing Home Sales fails to support New Home Sales figure. Japanese CPI give an early indication for inflationary pressures.

CURRENCY TRADING SUMMARY –28 MAY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) remained relatively unchanged against a basket of currencies despite Existing Home Sales disappointing on the back of positive New Home Sales seen the previous session. With markets expecting a figure of 6.14 mio for the month of April, the actual figure was released at 5.99 mio, yet its effect was limited due to an upward revision of the previous month to 6.15 mio. The USD initially lost ground against other majors before investors chose to square positions ahead of the long weekend. In US share markets the NASDAQ rebounded to gain by 19.27 points (+0.76%) whilst the Dow Jones also gained by 66.15 points (0.49%). Crude oil continued to rise over growing uncertainty in Nigeria and Iran. Oil rose by US$0.93 a barrel to US$65.11. Looking ahead, a slow beginning to the week is expected with U.S. markets closed for Memorial Day.

• The Euro (EUR) gained moderately on the back of a positive reading in Gfk consumer confidence. The figure for the month of June was expected to come in at 6 yet surprised many with a release of 7.3. Overall the EURUSD traded with a low of 1.3411 and a high of 1.3473 before closing the day at 1.3449 in the New York session. A slow start is also expected out of the EZ with many markets closed for trading.

• The Japanese Yen (JPY) was the biggest mover on Friday as CPI data matched expectations for the month of April, released at -0.1%. Up from the March’s decline of -0.3% giving indications that inflationary pressures are slowly returning. Although the USDJPY experienced early losses on the back of inflationary data, the pair moved higher to end the day. Overall, the USDJPY traded with a range of a low 120.85 and a high of 121.77 before closing near day highs at 121.72 in the New York session.

• The Sterling (GBP) was unchanged against the USD on Friday despite GDP data being released slightly higher than expectations. Although GDP (Q1) q/q came in on consensus at 0.7%, the y/y figure was up to 2.9% (Forecast: 2.8%). Overall the GBPUSD traded with a range of a low 1.9835 and a high of 1.9880 before closing 1.9846 in the New York session. Looking ahead UK will have a market holiday to begin the week on Monday

• The Australian Dollar (AUD) traded in a defined range once again on Friday, largely attributed to data absence. Overall the AUDUSD traded with a range of a low 0.8176 and a high of 0.8218 before closing the day at 0.8218 in the New York session.

• The Canadian Dollar (CAD) reached a fresh 29 ½ year high against the greenback due to higher oil prices and expectations for a hawkish statement from the Bank of Canada next week. Overall the USDCAD traded with a range of a low 1.0778 and a high of 1.0870 before closing the day at 1.0804 in the New York session.

• Gold (XAU) rebounded on Friday following the previous session’s sharp decline. Gold rose US$2.00 an ounce to US$655.30