Australian FOREX Daily Outlook 28/09/2007

USD eases on growing housing concerns, as New Home Sales a seven year low. Heavy data day for Japan.

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

·U.S. Dollar Trading (USD) fell against a basket of majors following a poor reading in US New Home Sales on Thursday. With emphasis on the housing sector prominent, purchases of new homes fell to an annual rate of 795K last month from a revised 867K in July, the lowest level in more than seven years. Poor data reading prompted investors to price in further rate cuts from the Federal Reserve, for a second time this year. In other data news, US GDP (Q2) was confirmed lower than forecast at 3.8% (forecasts: 3.9%) whilst Core PCE prices came in slightly higher than expectation but had little effect on the dollar. In U.S. share markets, the NASDAQ was up 10.56 points (+0.39%) whilst the Dow Jones was also up by 34.79 points (+0.25%). Crude oil rebounded well from previous declines, up US$2.64 a barrel to US$82.94 gaining on a broadly weaker dollar. Looking ahead Ben Bernanke is expected to talk today at Fed Conference, with markets paying attention to any indication of future rate policies.

·The Euro (EUR) traded at a record high for the 6^th session in recent times, as poor U.S. housing data added to short USD positions. However any follow through was short lived as the Euro paired its gains with investors selling the currency at a technical level. Overall the EURUSD traded with a range of a low 1.4125 and a high of 1.4190 before closing the day at 1.4157 in the New York session. Looking ahead, key inflationary data is set for release today with CPI data expected to be released at 2.1% (Previous: 1.7%)

·The Japanese Yen (JPY) fell almost 0.1% versus the dollar and 0.3% against the Euro as traders looked to rebuild carry trades. Overall the USDJPY traded with a range of a low 115.13 and a high of 115.88 before closing the day at 115.62 in the New York session. In a heavy data slate for Japan, key data is expected in the form of CPI, Unemployment Rate, Industrial Production, Household Spending and Retail Sales.

·The Sterling (GBP) snapped two days of losses against the USD as reports showed that house prices had risen at its fastest pace in three months, dwindling expectations that the Central Bank will cut rates. Overall the GBPUSD traded with a range of a low 2.0140 and a high of 2.0284 before closing the day at 2.0268 in the New York session. Looking ahead, Consumer confidence is expected to come out at -6 for the month of September down from the previous -0.4.

·The Australian Dollar (AUD) traded above key 88 cent levels on a bearish USD. Overall the AUD traded with a range of a low 0.8736 and a high of 0.8834 before closing the day at 0.8807 in the New York session.

·The Canadian Dollar (CAD) rose for the first time in four days on speculation a weakening U.S. housing market will slow the world’s largest economy. Overall the USDCAD traded with a low of 0.9979 and a high of 1.0052 before closing the day 1.0014 in the New York session.

·The South African Rand (ZAR) advanced to a two-month high after a report showed producer prices rose for a sixth month in August, adding to pressure on the central bank to lift interest rates. Against the dollar, the rand rose as much as 1.4 percent to the highest since July 25. The ZAR traded with a low of 68530 and a high 6.9635.

·Gold (XAU) rose as the dollar fell to an all-time low against the Euro, boosting the appeal of the precious metals as alternative investments. XAU traded with a low of 727.60 and a high of 735.90.