Australian FOREX Daily Outlook 06/11/2007

Write downs weigh on stock prices. RBA rate announcement nearing.

CURRENCY TRADING SUMMARY –  06 NOVEMBER 2007 (00:30GMT)

·                U.S. Dollar Trading (USD) was mixed against a basket of majors with currency strategists suggesting that the USD may fall to as low as 1.50 against the Euro by the year end. In data news, ISM Services for the month of October came in better at 55.8, above forecasts of 54, and the previous reading 54.8. In other news, Citigroup weighed on stock prices following reports that a further $11 billion write-down would compound last quarters $6.5 billion losses in light of the sub-prime mortgage crisis, prompting Chief executive Charles Prince to resign. In U.S. share markets the NASDAQ was down by -15.2 points (-0.54%) whilst the Dow Jones was also down by -51.7 points (-0.38%). Crude oil fell by US$1.72 a barrel to US$94.21.    

·                The Euro (EUR) was unchanged against the USD despite currency strategist forecasting the EURUSD pair to reach 1.50 by the year end.   Overall the EURUSD traded with a low of 1.4444 and a high of 1.4530 before closing the day at 1.4469 in the New York session. Looking ahead a heavy data day is scheduled for the Euro zone with releases in PMI services, PPI and Retail Sales.

·                The Japanese Yen (JPY) rallied following reports of Citigroup $11 billion write-down in sub-prime related assets, prompting investors to flee carry trades funded by the Japanese Yen. Overall the USDJPY traded with a low of 114.02 and a high of 114.81 before closing the day at 114.36 in the New York session.        

·                The Sterling (GBP) eased from 26 year highs seen in the previous session fuelled by a decline in global stocks limiting demand for high yielding currencies. The Sterling pound also suffered in reports suggesting that services last month grew at the slowest pace since May 2003. Overall the GBPUSD traded with a low of 2.0784 and a high of 2.0893 before closing the session at 2.0805 in New York.

·                The Australian Dollar (AUD) fell on the back of other majors, as a plunge in global stocks deterred investors from high yielding carry trades yet did well to recover as markets await an interest rate hike by the RBA on Wednesday the 7^th of November. The AUDUSD traded with a low of 0.9158 and a high of 0.9230 before closing the day at 0.9200 in the New York session. .

·                The South African Rand (ZAR) fell against all 16 major currencies today as global equity indexes retreated on concern losses from the U.S. sub prime-mortgage crisis is spreading. The USDZAR closed the session at 6.5820

·                Gold (XAU) closed above $800 an ounce for a second straight session, extending a rally to the highest since 1980, as energy costs rebounded, and sparking demand for the metal as a hedge against inflation. XAU traded with a low of 801.40 and a high of 811.50

·                Euro 1.4480

Initial support at 1.4404 (Nov 1 low) followed by 1.4371 (Oct 30 low). Initial resistance is now located at 1.4528 (Nov 2 trend high) followed by 1.4530 (March 1995 synthetic high)

·                Yen 114.40

Initial support is located at 114.03 (Nov 5 low) followed by 113.78 (Oct 25 low). Initial resistance is now at 114.96 (Nov 5 high) followed by 115.93 (Nov 1 high).

• Pound – 2.0810

Initial support at 2.0755 (Nov 1 low) followed by 2.0671 (Oct 31 low). Initial resistance is now at 2.0906 (Nov 2 trend high) followed by 2.1000 (Psychological round number)

• Australian Dollar – 0.9210

Initial support a 0.9105 (Nov 6 low) followed by 0.9076 (Oct 26 low). Initial resistance is now at 0.9251 (Nov 2 high) followed by 0.9344 (Oct 31 trend high).

• Gold – 807.50

          Initial support at 788.40 (Nov 2 low) followed by 777.10 (Oct 31 low). Initial resistance is now at 811.65 (Nov 5 trend high) followed by 815.00 (Round number resistance)