Australian FOREX Daily Outlook 31/10/2007

BoJ rate announcement a supporting act to FOMC

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

·                U.S. Dollar Trading (USD) was mixed against a number of majors on Tuesday following reports which showed U.S. consumer confidence fell to its lowest level in two years. With markets having forecasted a figure of 99 for the month of October, the figure disappointed coming in at 95.6 confirming that recent market turmoil, tighter lending conditions and surging energy prices have taken its toll on consumer sentiment. In U.S. share markets the NASDAQ down 0.73 (-0.03%) whilst the Dow Jones was also down -77.79 (-0.56%). Crude oil fell by US$3.15 a barrel to US$90.38 having traded as low as US$89.76. Looking ahead, all eyes will be placed on the FOMC interest rate announcements in which futures markets have priced in a 92% chance of another rate cut in order to resolve the worst housing slump in 16 years. Although markets remain split as to whether a 25 bp or a 50 bp cut will materialize. Accompanying the interest rate announcement will be a heavy slate of data including Core PCE, GDP, and PMI.      

·                The Euro (EUR) fell a pip short of the record high seen in the previous session ahead of Wednesday’s FOMC meeting. Overall the EURUSD traded with a low of 1.4375 and a high of 1.4441 before closing the day at 1.4436 in the New York session. Looking ahead, heavy data day is scheduled out of the EZ, including market sentiment and Unemployment Rate. Retail Sales out of Germany will also be released out of the Euro bloc.

·                The Japanese Yen (JPY) was range bound ahead of the BoJ and FOMC rate announcement on Wednesday. Furthermore poor reading in Unemployment did little to support the Japanese Yen, with the jobless rate rising to 4% from the previous 3.8%.     Overall the USDJPY traded with a low of 114.39 and a high of 115.03 having closed at 114.69 in the New York session. As mentioned, the Bank of Japan is widely expected to hold rates at 0.50%, ensuring borrowing costs remain at the lowest levels of all the industrialized nations.

·                The Sterling (GBP) traded at 26 year highs versus the USD on growing confidence in the BoE keeping rates unchanged for the remainder of 2007 (the highest levels since 2001, and the highest of the G7 nations) whilst the Fed is viewed to continue with their monetary loosening bias on October 31. The Sterling pound was boosted by BoE officials claiming the committee was not yet convinced of a rate cut needed in light of a slowing economy. The GBPUSD traded with a low of 2.0567 and a high of 2.0702 before closing the day at 2.0683 in the New York session. In the UK on Wednesday, Gfk Consumer Confidence and nationwide house prices will be paid attention to.

·                The Australian Dollar (AUD) was subject to profit taking in the later part of the Asian session before rebounding to fall just short of key 92 cent levels. The AUDUSD traded with a low of 0.9145 and a high of 0.9220 before closing the day at 0.9185 in the New York session.

·                The Polish Zloty (PLN) was little changed ahead of key interest rates decisions on Wednesday by both the Central Banks Monetary Council (MPC) and the U.S Federal Reserve. The USDPLN closed last week 2.5205 up 0.1%.  

·                Gold (XAU) fell from a 27-year high on speculation the Federal Reserve will keep borrowing costs unchanged tomorrow, boosting the dollar and reducing the appeal of the metal as an alternative investment. XAU traded with a low of 779.90 and a high of 792.00

·                Euro 1.4435

Initial support at 1.4316 (Oct 26 low) followed by 1.4248 (Oct 25 low). Initial resistance is now located at 1.4439 (Oct 29 trend high) followed by 1.4469 (This week’s open + last week’s range)

·                Yen 114.70

Initial support is located at 113.78 (Oct 25 low) followed by 113.26 (Oct 22 low). Initial resistance is now at 115.04 (Oct 23 high) followed by 115.72 (Oct 18 high).

• Pound – 2.0675

Initial support at 2.0481 (Oct 26 low) followed by 2.0427 (Oct 24 low). Initial resistance is now at 2.0694 (Oct 30 high) followed by 2.0750 (This week’s open + last week’s range)

• Australian Dollar – 0.9210

Initial support a 0.9076 (Oct 26 low) followed by 0.9010 (Oct 25 low). Initial resistance is now at 0.9272 (Oct 29 trend high) followed by 0.9341 (This week’s open + (last week’s range * 1.618).

• Gold – 778.60

        Initial support at 769.80 (Oct 26 low) followed by 762.00 (Oct 25 low). Initial resistance is now at 794.70 (Oct 29 trend high) followed by 800.00 (Round number resistance)