Australian FOREX Daily Outlook 31/08/2007

Markets Cautious ahead of Bernanke’s speech. Japanese CPI point of interest.

CURRENCY TRADING SUMMARY –31 AUGUST 2007 (00:30GMT)

• U.S. Dollar Trading (USD) rebounded on Thursday as investor’s looked to pair off risky assets. U.S. share markets lost modest ground in an uninspiring session, ensuring that the USD was able to gain ever so slightly on high yielding currencies such as the Euro, AUD and the NZD. In data news the GDP for the second quarter was released on relative expectations, but took a back seat as investors continued to look towards equity prices as an indication of market volatility. Further fallouts in the sub prime market were seen following Lehman Brothers reducing its earnings estimates of other investment banks, causing market jitters. Yet plenty of cautiousness remained in all markets ahead of Chairman Bernanke’s talk on Friday at a Fed Symposium, where it is expected he will address housing and monetary policy. In U.S. share markets the NASDAQ was up slightly by only 2.14 points (+0.08%) whilst the Dow Jones fell by 50.56 (-0.38%). Looking ahead, apart from Chairman Bernanke’s speech today, other data will include the Michigan Sentiment survey and Chicago PMI.

• The Euro (EUR) lost ground on further uncertainty in financial market and the sub prime issues. Overall the EURUSD traded with a range of a low 1.3592 and a high of 1.3681 to close at 1.3635 in the New York session.

• The Japanese Yen (JPY) was relatively unchanged by session end, although gaining modestly on carry trade unwinding. Overall the USDJPY traded with a range of a low 115.21 and a high of 116.24 before closing the day at 115.80 in the New York session. In data news, key inflationary data was released out of the Japanese markets this morning with Core Nationwide CPI on consensus (-0.1%), and Core Tokyo CPI unchanged from the previous figure.

• The Sterling (GBP) lost significant ground on the USD as reports circulated the BoE 1.6 billion pounds at its penalty rate of 6.75 percent, stoking fears financial institutions are finding it hard to find money. The currency further suffered on the back of carry trades unwinding. Overall the GBPUSD traded with a range of a low 2.0045 and a high of 2.0183 before closing the day at 2.0135 in the New York session.

• The Australian Dollar (AUD) fell on the back of market uncertainty trading at a low of 0.8129 and a high of 0.8228 before closing the day at 0.8156 in the New York session. Retail Sales for the month of July was released at 0.9% (forecast: 0.6%), whilst Trade Balance also came in better than expected narrowing to -756 million from the previous -1751 million.

• Gold (XAU) eased on Thursday by US$1.50 an ounce to US$673.90

CURRENCY PAIR IN FOCUS

• EURJPY rebounded from the biggest decline versus the Euro since January 2001, as concern of U.S. sub-prime mortgage losses and weakening credit markets pushed investors to shun riskier assets funded by loans in Japan, Overall the EURJPY traded with a low 156.78 and a high of 158.98 before closing the day at 158.03 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.3655

Initial support at 1.3562 (38.2% retracement of the 1.3360 to 1.3687 advance) followed by 1.3534 (Aug 23 low). Initial resistance is now located at 1.3687 (Aug 27 high) followed by 1.3711 (Aug 13 high).

• Yen 115.95

Initial support is located at 113.85 (Aug 29 low) followed by 113.67 (Aug 20 low (113.72 is the 61.8% retracement)). Initial resistance is now at 116.25 (Aug 29 high) followed by 116.75 (Aug 27 high).

• Pound – 2.0145

Initial support at 1.9961 (Aug 29 low) followed by 1.9859 (61.8% retracement of the 1.9652 to 2.0195 advance). Initial resistance is now at 2.0195 (Aug 27 high) followed by 2.0272 (61.8% retracement of the 2.0656 to 1.9652 decline)

• Australian Dollar – 0.8175

Initial support a 0.8051 (Aug 29 low) followed by 0.8005 (50% retracement of the 0.7674 to 0.8336 advance). Initial resistance is now at 0.8234 (Aug 29 high) followed by 0.8288 (Aug 28 high)

• Gold – 664.60

Initial support at 657.70 (Aug 24 low) followed by 653.70 (Aug 20 low). Initial resistance is now at 669.00 (Aug 29 high) followed by 676.80 (Aug 8 high)