Australian FOREX Weekly Outlook 16/07/2007

EURUSD trades at an all time high of 1.3815 to end the week. CPI the theme for the week ahead.

16/07/07

last week’s currency trading review

The Dollar continued to suffer for the most part of the week as further uncertainty in the Sub Prime Mortgage market attributed to significant USD weakness. Trading near multi year lows against a basket of currencies the USD gained no support from data with Retail Sales adding to further pressure on Friday remaining constant with the weekly theme. The Euro was one of the biggest movers throughout the week as a broadly weaker dollar ensured that the EURUSD pair reached a record high in four consecutive session throughout the week, with Friday’s all time high reaching 1.3815. The currency was supported by hawkish comments from ECB president Trichet on Wednesday who indicated future rate hikes may materialize. In other news, French officials renewed attacks on the appreciated currency on Friday, where a high exchange rate has unearthed negative factors of the French economy in recent times. The Euro closed last week at 1.3785 having opened the week at 1.3624. The Japanese continued to fund high yielding currencies highlighted by touching all time high against the Euro and multi year high against the GBP. The BoJ surprised no one in the market by keeping rates at an unchanged 0.50% on Thursday, although reports suggested that the vote was in fact 8 to 1 (1 vote for a rate hike) and not as unanimous as first thought. The Japanese Yen did however gain some support late in the week with Iran requesting that the Oil supplies purchased by Japan be paid for with the Japanese currency and not USD, as growing pressures arise from the West regarding Iran’s nuclear program. The Japanese Yen closed last week at 122.62 having opened at 123.34. The GBP was quiet in terms of data release, yet continued to trade at 26 year highs against the greenback through much of the week. The GBP closed last week at 2.0329 having opened at 2.0150. The AUD surprisingly was subject to negative data last week, with a poor figure in Consumer Confidence and a slide up in Unemployment Rate to 4.3% did little to ease a bullish outlook on the Aussie Dollar. The Aud closed last week at 0.8698 having opened at 0.8602.

The forex trading week preview

In the States plenty of data is expected out of the US this week, although the majority will be leaning towards the softer side. Manufacturing data proves to be a popular theme for the week beginning with the NY Fed Manufacturing survey on Monday, PPI and Industrial Production out on Tuesday whilst the Philly Fed Survey. In other data, TIC flows will be released on Tuesday, whilst CPI and Housing starts will be released on Wednesday. Federal Reserve Chairman Bernanke will testify before the house on Thursday over the state of the US economy, as the FOMC minutes of the June 28 meeting will round of the week on Thursday and Fed Official Poole scheduled to talk on the sub prime on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone key data out of the EZ will be released in the form of Mondays CPI and Tuesday German ZEW survey, before President Trichet will talk on Friday. In the UK will be kept busy throughout the week with CPI out on Tuesday. The BoE minutes and Unemployment Rate on Wednesday. Retail Sales and GDP out Thursday and Friday respectively. We will provide our previews and reviews of these data releases in the daily summary.

In Japan an extremely quiet week is expected with only the BoJ minutes out on Tuesday expected to generate the most interest. We will provide our previews and reviews of these data releases in the daily summary.

In Australia another quiet week will be scheduled for the Aussie markets with only RBA Governor Stevens scheduled to talk on Tuesday. In other News, New Zealand will release their CPI early Asian session on Monday. We will provide our previews and reviews of these data releases in the daily summary.

The currency in focus

We re-visit a currency pair mentioned previously which is exhibiting similar short term historical trends. CAD/JPY has been appreciating of late due to CAD strength from expectations of further interest rate hikes, rising oil prices, and inbound M&amp A deals. The JPY however, has been stagnant somewhat as the Bank of Japan has not yet given a clear indication of possible interest rate moves in the future, and the data from Japan has been anything but extremely positive. CPI from Canada this week will be viewed with interest as it could lend support to further interest rate hikes from the Canadian economy. The BoJ Meeting Minutes is not expected to shed any light on future monetary policy decisions by the board members. CAD/JPY seems to be exhibiting a recurring trading range with resistance situated at 118.00, and with strong initial support at 116.00

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