Australian FOREX Daily Outlook 31/12/2007

U.S New Home Sales at 12 year low. Existing home sales out on New Years Eve.

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

·U.S. Dollar Trading (USD) remained pressured following conflicting data on Friday. Chicago PMI rebounded well for the month of December coming in at 56.6 above the forecasted 51.8, yet any gains for the currency were capped by a decline New Home Sales which fell -9.0%, seen at 647k for November to set a new 12 year low. The data gave further indication that the housing slow down still had further scope for worsening downside, prompting investors to reconsider the possibility of another rate cut from the Federal Reserve in their first meeting for 2008. In U.S. share markets the NASDAQ was down -2.33 (-0.09%) whilst the Dow Jones closed slightly higher by 6.26 points (+0.05%). Crude oil continues to remain buoyant during the holiday period, despite falling by US$0.36 a barrel to US$96.27. No rest for the wicked on New Years Eve as key data will be released in the form of Existing Home Sales which is forecasted to be released as previous of 4.97 mln units for the month of November.

·The Euro (EUR) continued on its end of year rally as 12 year low reading in housing data out of the U.S. ensured investors fled the green back and found comfort in the Euro bloc currency. Overall the EURUSD traded with a low of 1.4593 and a high of 1.4728 before closing the day at 1.4715 in the New York session.

·The Japanese Yen (JPY) enjoyed a heavy slate of data on Friday with the majority of the releases supportive of the currency, but not enough to cause speculators to price in a rate hike. Instead the currency was supported by a follow on of risk aversion from the previous session unfortunate killing of Pakistan opposition leader Bhutto. Overall the USDJPY traded with a low of 112.67 and a high of 114.02 before closing the day at 112.80 in the New York session.

·The Sterling (GBP) found significant support during the European session and the early part of New York trading on the back of a broadly weaker dollar. Nationwide House Prices fell for a second consecutive month in December to -0.5%, pushing the EURGBP cross to a record high of 0.7388. The GBPUSD traded with a low of 1.9904 and a high of 2.0021 before closing the session at 1.9927 in the New York session.

·The Australian Dollar (AUD) gained on the back of a broadly weaker dollar yet any upside moves were limited on the back of heightened risk aversion. Overall the AUDUSD traded with a low of 0.8723 and a high of 0.8788 before closing the day at 0.8736 in the New York session.

·Gold (XAU) continued to head higher on increasing energy costs and heightened risk, boosting the appeal for gold as a safe haven investment. XAU traded with a low of 824.80 and a high of 840.60

TECHNICAL COMMENTARY

·Euro – 1.4725

Initial support at 1.4592 (Dec 28 low) followed by 1.4470 (Dec 27 low). Initial resistance is now located at 1.4727 (Dec 28 high) followed by 1.4751 (Dec 11 high).

·Yen – 112.45

Initial support is located at 112.68 (Dec 28 low) followed by 111.82 (38.2% retracement of the 107.23 to 114.66 advance). Initial resistance is now at 114.01 (Dec 28 high) followed by 114.66 (Dec 27 high)

·Pound – 1.9945

Initial support at 1.9904 (Dec 28 low) followed by 1.9826 (Dec 27 low). Initial resistance is now at 2.0022 (Dec 28 high) followed by 2.0045 (23.6% retracement of the 2.1161 to 1.9700 decline)

·Australian Dollar – 0.8770

Initial support a 0.8660 (Dec 24 low) followed by 0.8553 (Dec 18 low). Initial resistance is now at 0.8795 (Dec 14 high) followed by 0.8907 (Dec 12 reaction high)

·Gold – 840.60

Initial support at 821.70 (Dec 27 low) followed by 805.20 (Dec 25 low). Initial resistance is now at 840.05 (Dec 28 high) followed by 845.8 (November 8 trend high)