Australian FOREX Weekly Outlook 07/08/2007

Credit market jitters continue to move currencies. All eyes on FOMC this week.

7/08/07

last week’s currency trading review

The Dollar began the week pressured before correcting in latter sessions. Concerns from the markets with regards to the sub-prime/credit problem have been the main driving forces for the week, causing instability in both equity and currency markets. The Greenback was not helped by softer than expected Core PCE and ISM manufacturing data releases, and also especially a softer than expected Non-farm payroll number. The Euro was generally stronger against the USD especially towards the end of last week’s trading as the weaker USD help push EUR/USD higher. A positive HICP reading and PMI manufacturing helped propel the EUR further up against the USD. As expected, the ECB kept interest rates on hold with ECB President Trichet stating “strong vigilance” with regards to inflationary risks prompting the market to price in a September rate hike. The EURUSD closed last week at 1.3815 having opened at 1.3690. The Japanese hit 3 month lows against the USD at 117.60 as carry trade unwinding entered the market amidst the from the US. Earlier in the week unemployment fell to 3.7% from 3.8% previously, however the PMI manufacturing release was anything but satisfactory continuing the mixed bag of data releases from Japan. The USDJPY closed last week at 118.26 from an opening of 119.04. The GBP recovered somewhat as carry trade unwinding affected the highest yielding currency in the G7. Cable was partially supported by stronger than expected retail sales figures and PMI manufacturing however consumer confidence fell to its lowest level since April this year. The Bank of England as expected kept rates steady at 5.75%.The GBPUSD closed last week at 2.0450 well up on the open of 2.0247. The AUD was very much range-bound in last week’s trading as little in the way of data was released out of Australia. The Aussie did find support in a better than expected retail sales number but was short lived after the poor trade balance release.

The AUDUSD closed last week at 0.8574 having opened at 0.8543.

The forex trading week preview

In the States In what is a relatively quiet week from the US, the main point of Focus will be the FOMC interest rate decision (Tuesday) followed by initial jobless claims (Thursday).We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone There is no data as such for the Eurozone, but there will be focus on Europe’s largest economy Germany and their industrial production (Tuesday). In the UK Wednesday will provide the BoE inflation report which will take precedence for the UK this week. We will provide our previews and reviews of these data releases in the daily summary.

In Japan Machine orders on Wednesday is due for release. Industrial production and consumer confidence are due to be released at the end of the week We will provide our previews and reviews of these data releases in the daily summary.

In Australia The RBA announcement on Wednesday and unemployment on Thursday are the two key releases. We will provide our previews and reviews of these data releases in the daily summary.

KEY WEEKLY PIVOTAL LEVELS

• Euro 1.3810

Initial support at 1.3683 (Aug 3 low) followed by 1.3637 (Aug 1 low). Initial resistance is now located at 1.3853 (Jul 24 trend high) followed by 1.3941 (This week’s open
+ (last week’s range * 0.618).

• Yen 118.70

Initial support is located at 117.18 (Aug 6 low) followed by 116.37 (Mar 28 low). Initial resistance is now at 119.51 (Jul 31 high) followed by 119.85 (38.2% retracement of the 124.17 to 117.18 decline).

• Pound – 2.0315

Initial support at 2.0180 (Jul 30 low) followed by 2.0134 (July 30 low). Initial resistance is now at 2.0464 (Aug 6 high) followed by 2.0474 (61.8% of the 2.0656 to 2.0180 decline)

• Australian Dollar – 0.8575

Initial support a 0.8491 (Aug 2 low) followed by 0.8435 (61.8% retracement of the 0.8163 to 0.8875 advance). Initial resistance is now at 0.8605 (Aug 2 high) followed by 0.8616 (Jul 31 high)

• Gold – 671

Initial support at 659.4 (Aug 1 low) followed by 657.16 (Jul 27 low). Initial resistance is now at 676.77 (Jul 26 high) followed by 687.40 (Jul 24 high)