Australian FOREX Daily Outlook 28/06/2007

High Yielder’s fall on the back of Yen cross sell off. Japanese Yen trades under 123.00 as carry trades loose their appeal. FOMC interest rate announcement

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

• U.S. Dollar Trading (USD) rallied against a basket of currencies in the early part of the European session, before any further rallying was capped with reports showing new orders for durable goods tumbled more than expected in May, the first decline since January. Cautiousness remained ahead of the conclusion of the two day FOMC meeting on Thursday. In U.S. share markets the NASDAQ was up 31.19 points (+1.21%) whilst the Dow Jones was also up by 90.07 points (+0.68%). Crude oil rose by US$1.20 a barrel to US$68.97. Looking ahead, the biggest piece of economic data out of the US to day will be the FOMC announcement, with markets forecasting an unchanged rate of 5.25%. That said, investors will eagerly await accompanying statements made by officials. The Fed rate will be accompanied by GDP for the first quarter will be confirmed at 0.8% (Previous: 0.6%). Other data will be released in the form of Core PCE for the first quarter will also round of the week as forecasts are at 2.2%, unchanged from the previous.

• The Euro (EUR) fell almost 0.1% against the USD trading on the back of other majors. With slight cross JPY unwinding, the EURJPY fell by 100pts, simultaneously weighing heavy on the EURUSD. Overall the pair traded with a range of a low 1.3415 and a high of 1.3459 before closing the day at 1.3444 in the New York session. Looking ahead, M3 money supply for the month of May will be the biggest piece of data out of the EZ on Thursday, with analysts expecting that he figure will ease slightly to 10.3% (Previous: 10.4%).

• The Japanese Yen (JPY) was the biggest mover on Wednesday, gaining across the board for the third consecutive session. The Yen rally was attributed to volatility in global stocks and uncertainty surrounding the sub-prime mortgage sector in the US markets caused investors to take a risk aversion approach, exiting carry trades to a certain degree. As a result the JPY moved away from recent multi-year highs against a number of yielder’s. The Dollar was down more than 0.6% against the yen, its worst one-day decline in two months, bringing its drop against the yen for the last 3 days to 1.1%. Overall, the USDJPY traded with a low of 122.23 and a high of 123.27 before closing the day at 122.50 in the New York session. Looking ahead key data Japan will be release in the form of Industrial Production for the month of May, as economists expect a significantly better number of 0.8% from the previous -0.2%. UPDATE: Industrial Production at -0.4%

• The Sterling (GBP) was the least affected currency on Wednesday’s moves remaining relatively unchanged against the greenback on expectations the BoE could hike rates as early as next week. However, Sterling fell sharply against the JPY as warnings against one-way bets in currency markets tempered investor’s appetite for risk, causing them to cut exposure to carry trades. Overall the GBPUSD traded with a range of a low 1.9929 and a high of 1.9989 before closing the day at 1.9977 in the New York session. Looking ahead, key data out of the UK will be released in the form of New Home Sales for the month of May on Thursday, as expectations of the figure remain are forecasted at 0.4% down from the previous month of 0.5%

• The Australian Dollar (AUD) was arguably the most affected currency from yesterday risk aversion, which saw the AUD traded under key 0.84c levels. Overall the AUDUSD traded in volatile day with a low of 0.8355 and a high of 0.8460 before closing the day near day lows at 0.8367 in the New York session.

• The Kiwi Dollar (NZD) dropped more than 0.8% on Wednesday on unwinding of carry trade positions. Interestingly enough, RBNZ deputy governor said in an article released overnight that the bank’s market interventions were aimed at moderating the rise in the currency, not defending a level. The NZDUSD traded last at 0.7589 in the New York session. Looking ahead, key data will be released in the form of Current Account for the first quarter, with analysts expecting the figure to be released at -2.33 bln (Previous: -3.929 bln). UPDATE: Current Account at -2.217 for the Q1.

• The Polish Zloty (PLN) strengthened on Wednesday after the central bank unexpectedly increased interest rates. The PLN strengthened 0.5% against both the EUR and dollar after rates were raised 25basis points to 4.5%, to tame inflation and wage pressures

• Gold (XAU) fell by US$0.50 an ounce to US$644.80 amidst global profit taking.

TECHNICAL COMMENTARY

• Euro 1.3455

Initial support at 1.3371 (June 21 low) followed by 1.3326 (Jun 14 low). Initial resistance is now located at 1.3514 (Jun 7 high) followed by 1.3556 (June 5 high)

• Yen 122.90

Initial support is located at 122.15 (June 1 low) followed by 122.00 (Round number). Initial resistance is now at 124.17 (Jun 22 trend high) followed by 125.00 (Psychological round number)

• Pound – 1.9900

Initial support at 1.9869 (June 20 low) followed by 1.9824 (Jun 19 low). Initial resistance is now at 2.0017 (June 26 high) followed by 2.0076 (May 1 reaction high)

• Australian Dollar – 0.8395

Initial support a 0.8354 (June 27 low) followed by 0.8333 (Jun 14 low). Initial resistance is now at 0.8514 (Jun 26 trend high) followed by 0.8558 (Jan 1989 former low)

• Gold – 643.80

Initial support at 639.50 (June 26 low) followed by 637.36 (Mar 14 low). Initial resistance is now at 662.35 (61.8% retracement 674.00 to 643.50 decline) followed by 674.0 (June 4 high)