Australian FOREX Daily Outlook 23/07/2007

China raises rates causing Carry Trade Unwind. Commodity bloc currencies remain near record highs. 

CURRENCY TRADING SUMMARY –  23 JULY 2007 (00:30GMT)

• U.S. Dollar Trading (USD) continued to ease amidst ongoing concerns in the sub-prime mortgage market which is now assumed to have a greater impact on the consumer spending and the economy as a whole. In U.S. share markets the NASDAQ was also down by 32.44 points (+1.19%) whilst the Dow Jones also tumbled below key levels, dropping by 149.33 points (-1.07%). Crude Oil eased by US$0.35 a barrel to US$75.57.       

• The Euro (EUR) gained against the USD on Friday breaking key levels and trading well above the 1.38 level. Overall the EURUSD traded with a range of a low 1.3780 and a high of 1.3844 before closing the day 1.3824 in the New York session. 

• The Japanese Yen (JPY) was helped by the Chinese central bank, which in a widely expected move raised one-year benchmark deposit and lending rates overnight. The yen is used as a proxy for the tightly controlled Chinese Yuan and though the reaction was delayed may have prompted some investors to unwind their carry trades, where investors borrow a low yielding currency to by a high yielding. The Yen rose against all currencies as carry trades unwind due to higher interest rate in China and sell off in U.S. stocks. Overall the USDJPY traded with a range of a low 120.87 and a high of 122.44 before closing the day at 121.23 in the New York session.

• The Sterling (GBP) gained on Friday as data showed the UK economy grew faster than expected in the second quarter, hitting a 26-year high against the dollar, as investors began pre-empting future rate hikes. Overall the GBPUSD traded with a range of a low 2.0483 and a high of 2.0587 before closing the day at 2.0548 in the New York session. 

• The Australian Dollar (AUD) was range bound for much of the session whilst maintaining its bullish outlook. Overall the AUDUSD traded with a low 0.8754 and a high of 0.8833 before closing the day at 0.8797 in the New York session.

• The Canadian Dollar (CAD) traded in range for much of the session. Stronger oil prices have helped lift the Canadian dollar in recent months, as Canada is a major oil exporter. Overall the USDCAD traded with a range of a low 1.0415 and a high of 1.0498 before closing the day at 1.0475 in the New York session.

• Gold (XAU) rose by US$6.60 an ounce to US$684.70 

TECHNICAL COMMENTARY                                                                                                                   

• Euro 1.3830

Initial support at 1.3730 (July 11 low) followed by 1.3592 (Jul 10 low). Initial resistance is now located at 1.38 (Jul 20 trend high) followed by 1.3852 (Open + (Last weeks range * 1.618).

• Yen 120.95

Initial support is located at 120.86 (Jun 20 low) followed by 120.76 (June 8 reaction low). Initial resistance is now at 122.62 (Jul 13 high) followed by 123.68 (Jul 7 high)

• Pound – 2.0580

Initial support at 2.0460 (Jul 18 low) followed by 2.0243 (Jul 11 low). Initial resistance is now at 2.0588 (July 20 trend high) followed by 2.0683 (Channel Resistance)

• Australian Dollar – 0.8800

Initial support a 0.8717 (Jul 17 low) followed by 0.8653 (Jul 13 low). Initial resistance is now at 0.8836 (Jul 20 trend high) followed by 0.8919 (1.00 progression of 0.8163-0.8749 from 0.8333)

• Gold – 665.70

Initial support at 663.00 (Jul 17 low) followed by 671.60 (Jul 19 low). Initial resistance is now at 686.30 (Jul 20 high) followed by 690.90 (May 7 low)