Australian FOREX Daily Outlook 29/01/2007

CURRENCY TRADING SUMMARY –29 JANUARY 07 (23:30GMT)

• U.S. Dollar Trading (USD) strengthened against the Euro following stronger than expected data from the US housing and manufacturing sectors, indicating that the economy remains in solid footing.With new homes coming in higher than expected at 1.12 million rather than the forecasted 1.05 million, whilst Durable goods forecasted at 2.5% came in at 3.1%. Overall major currencies were little changed against the Dollar. In other markets the NASDAQ was up 1.25 points (0.05%) whilst the Dow Jones dropped by 15.54 points (-0.12%). Crude oil prices rose on Friday on expectations that colder weather could be seen throughout the US. Also, growing political tensions between the US and Iran caused a rise of US$1.19 to US$55.42 a barrel.

• The Euro (EUR) dropped slightly against the USD as a result of strong economic data out of the US. The Euro traded within a low of 1.2877 to a high of 1.2945 before closing at 1.2911 during the New York session. Thursday saw the release of the German IFO- business climate index which slipped to 107.9 from December’s 108.7, confounding forecast for a rise to 109.

• The Japanese Yen (JPY) edged down following it gains the previous two days against the Dollar. Following plenty of comments made by Japanese and European officials, most analysts concluded for now that the G10 summit on Feb 9-10 would not yield a group statement on the yen. In the Asian session, following soft inflation figures, doubts arose on whether the BoJ will raise rates next month. Japanese core consumer prices rising 0.1% in the month of December from the previous year caused demand for the JPY to decline. Overall, The USDJPY traded within a low of 121.22 and a high of 121.66 before closing at 121.56 in the New York session. Looking ahead, Retail sales are scheduled to be released with expectations being -0.5% worse than prior -0.1%. UPDATE: Retail sales posted a drop of 0.2% compared to a -0.5% estimate.

• The Sterling (GBP) eased 0.3% to two-week lows against the US dollar, following uncertainty over Britain’s interest rate policy. The Sterling traded within a low of 1.9560 and a high of 1.9682 before closing at 1.9590.

• The Australian Dollar (AUD) continued to slide following a less than expected CPI data release. The AUD traded within a low of 0.7722 and a high of 0.7747 before closing the day at 0.7731 (New York).

• Gold (XAU) eased from its 2007 high as a result of a stronger US dollar and option-related selling. Gold dropped by US$3.40 an ounce to US$644.70.

TECHNICAL COMMENTARY

• Euro 1.2925

Initial support at 1.2876 (Jan 26 low) followed by 1.2865 (Jan 12 reaction low). Initial resistance is now located at 1.3054 (Jan 9 high and 38.2% of 1.3368 to 1.2865) followed by 1.3117 (50% retracement of the 1.3368 to 1.2865 decline).

• Yen 121.45

Initial support is located at 120.19 (Jan 25 low) followed by 120.06 (Jan 15 corrective low). Initial resistance is now at 121.65 (Jan 26 high) followed by 121.81 (Jan 22 trend high)

• Pound – 1.9610

Initial support at 1.9558 (Jan 26 low) followed by 1.9512 (61.8% retracement of the 1.9262 to 1.9917 advance). Initial resistance is now at 1.9683 (Jan 26 high) followed by 1.9833 (Jan 24 high)

• Australian Dollar – 0.7740

Initial support at 0.7720 (Jan 12 low) followed by 0.7698 (50% retracement of the 0.7414 -0.7982 rally). Initial resistance is now at 0.7821 (Jan 25 high) followed by 0.7940 (Jan 23 high).

• Gold – 647.60

Initial support at 641.10 (Jan 26 low) followed by 639.25 (Jan 24 corrective low). Initial resistance is now at 654.60 (Jan 25 high) followed by 656.20 (Aug2, 2006 reaction high)