Australian FOREX Daily Outlook 29/06/2007

Fed Rate unchanged as “inflation to expand at moderate pace”. Carry trades rturn ahead of key Japanese Inflationary data.

CURRENCY TRADING SUMMARY –29 JUNE 2007 (00:30GMT)

• U.S. Dollar Trading (USD) was relatively steady on Thursday amidst the Federal Reserve keeping rates unchanged at 5.25%, failing to provide any direction on future rate hikes. In a statement outlining its decision, the U.S. central bank dropped a reference describing core inflation as “elevated” that had been in its two prior rate announcements, but expressed concern, nonetheless, that the easing in nonfood, non energy price increases could prove fleeting. In other data news, GDP data came slightly worse than consensus at 0.7% (Forecast: 0.8%). In U.S. share markets the NASDAQ rose by 3.02 (+0.12%) whilst the Dow Jones fell by -5.45 points (-0.04%). Crude oil rose by US$0.60 a barrel to US$69.57. Looking ahead, key data will be in the form in Core PCE with forecasts at 0.1% (Previous: 0.1%)

• The Euro (EUR) was flat against the USD during Thursday’s session of trading. Overall the EURUSD traded with a range of a low 1.3441 and a high of 1.3483 before closing the day at 1.3433 in the New York session. Looking ahead, Consumer Confidence and CPI for both for the month of June will be made public on Friday. Analysts forecast figures of 111.7 (Prior: 111.9) and 1.9% (Prior: 1.9%) respectively.

• The Japanese Yen (JPY) eased against the dollar and was up 0.1% during the US session of trading. Further more, indications of the carry trade returning were supported by the gaining by 0.2% against the Yen. Overall the USDJPY traded with the range of a low 122.78 and a high of 123.37 before closing the day at 123.19 in the New York session. Looking ahead, further focus will remain on Japanese markets, with Household Spending (Forecast: 0.5%, Prior: 1.1%), Unemployment Rate (forecast: 3.9%, Prior: 3.8%) and CPI (Forecast: -0.1%, Prior: -0.1%). UPDATE: CPI at -0.1%, Household Spending 0.4%, Unemployment Rate 3.8%

• The Sterling (GBP) strengthened against the dollar on Thursday on the back of surprisingly strong British housing data. The GBP was also supported by comment by Bank of England policymakers that inflationary risks remain to the upside. The pound traded above $2 to a fresh two-month high against the dollar. Overall the GBPUSD traded with a low 1.9976 and a high of 2.0042 before closing the day at 2.0014 in the New York session. Looking ahead, UK Current Account will be released on Friday as economists expect the figure to be released at -11.7. In other data, GDP for the first quarter will also be made public, with forecasts at 0.7% same as the previous.

• The Australian Dollar (AUD) rebounded substantially as the AUDJPY also moved on the upside. The AUDUSD traded with a range of a low 0.8384 and a high of 0.8470 before closing the day at 0.8461 in the New York session.

CURRENCY OF THE WEEK

• The Kiwi Dollar (NZD) Jumped against the JPY as investors moved back into carry trades, investing the low yielding Yen in the high yielding Kiwi. NZD gained the most against the Yen rising 1.2% to 94.55 crawling back toward the 20 years high it hit last week.

• Gold (XAU) rose by US$5.60 an ounce to US$650.40

TECHNICAL COMMENTARY

• Euro 1.3440

Initial support at 1.3414 (June 27 low) followed by 1.3371 (Jun 21 low). Initial resistance is now located at 1.3514 (Jun 7 high) followed by 1.3556 (June 5 high)

• Yen 123.25

Initial support is located at 122.22 (June 27 low) followed by 122.00 (Round number). Initial resistance is now at 123.71 (76.4% retracement of the 124.17 to 122.22 decline) followed by 125.00 (Psychological round number)

• Pound – 2.0025

Initial support at 1.9929 (June 27 low) followed by 1.9887 (Jun 21 low). Initial resistance is now at 2.0076 (May 1 reaction high) followed by 2.0098 (April 19 high)

• Australian Dollar – 0.8480

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 – 647.90

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)