RBA Hike Rates, As US Services Industry Declines At It Fastest Rates In 7 Years

CURRENCY TRADING SUMMARY – 06 JANUARY 2008 (00:30GMT)

· U.S. Dollar Trading (USD) was volatile largely on the back of a significant contraction in ISM services figures for the month of January, coming in at 41.9 lower than the forecasted 53, the lowest reading since Oct 2001, intensifying concerns of a recession in the US, pressuring the Fed to cut rates further. It must be noted that the services sector contributes 70 to 80 % of the U.S. economy. In U.S. share markets the NASDAQ was down 73.28 points (-3.08%), whilst the Dow Jones was also down by 370.03 points (-2.93%) Crude oil also fell on Tuesday by US$0.26 a barrel to US$88.15.

· The Euro (EUR) was subject to poor data in the form of PMI services, which was released at 50.6, lowest showing since July 2003, prompting many traders to expect European Central Bank will be forced to trim its 2008 GDP growth forecast as early as March and eventually ease monetary policy this year. Overall the EURUSD traded with a low of 1.4620 and a high of 1.4834 before closing the day at 1.4648 in the New York session.

· The Japanese Yen (JPY) rallied against a number of majors as concerns surrounding the US economic slow down. As Asian stock prices closed lower, a flow on effect was seen on major European and US equity markets, ensuring the Yen was relieved of much of its role as a low funding currency. Overall the USDJPY traded with a low of 106.60 and a high of 107.74 before closing the day at 106.73 in the New York session.

· The Sterling (GBP) also weakened on a sharp sell of against the JPY, and growing expectations that the BoE will cut rates by 25 basis points on Thursday. In other data news, the UK PMI were slightly higher than expectations, in at 52.5 (Forecast: 52.4). Overall the GBPUSD traded with a low of 1.9605 and a high of 1.9764 before closing the day 1.9637 in the New York session.

· The Australian Dollar (AUD) although expected, saw an extremely courageous move by the RBA, hiking interest rates by 25bps to 7%, the highest level in 11 years, as concerns of inflation remain prominent, despite views of monetary easing surrounding several central banks. RBA Governor Stevens noted the global economy is slowing but added domestic economic growth may be commodity-driven. Inflation remains above the RBA's target zone of 2% to 3%. Any further upside moves were limited by a broadly stronger USD, and falling equity markets. Overall the AUDUSD traded with a low of 0.8939 and high of 0.9090 before closing the day 0.8963 in the New York session.

· Gold (XAU) fell to the lowest in more than a week after the dollar rose against a number of majors, eroding the appeal of the precious metal as an alternative investment. XAU traded with a low of 886.10 and a high of 906.25

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.4592	1.4622	1.4640	1.4859	1.4956
USD/JPY	104.97	105.77	106.55	107.74	107.89
GBP/USD	1.9500	1.9576	1.9655	1.9763	1.9941
AUD/USD	0.8819	0.8942	0.8965	0.9102	0.9125
XAU/USD	882.58	885.00	888.80	907.10	912.90

· Euro – 1.4640

Initial support at 1.4661 (Jan 25 low) followed by 1.4592 (Jan 24 low). Initial resistance is now located at 1.4799 (Jan 28 high) followed by 1.4859 (Jan 16 high).

· Yen – 106.55

Initial support is located at 106.01 (Jan 28 low) followed by 104.97 (Jan 23 low). Initial resistance is now at 107.89 (Jan 25 high) followed by 107.95 (Jan 16 high)

· Pound – 1.9655

Initial support at 1.9814 (Jan 29 low) followed by 1.9731 (Jan 28 low). Initial resistance is now at 1.9929 (Jan 29 high) followed by 2.0034 (38.2% retracement of 2.1161 to 1.9338 decline)

· Australian Dollar – 0.8965

Initial support a 0.8768 (Jan 28 low) followed by 0.8691 (Jan 24 low). Initial resistance is now at 0.8907 (Jan 29 high) followed by 0.9022 (Jan 15 reaction high)

· Gold – 888.80

Initial support at 908.10 (Jan 23 low) followed by 876.80 (Jan 23 high). Initial resistance is now at 933.30 (Jan 29 high) followed by 950.0 (Psychological round number)

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Reserve Bank Of Australia Hikes Rate By 25 Bps As Expected And Signals Further Close Monitoring Of Inflation. AUD Stays Attractive For Yield Seekers

CURRENCY TRADING SUMMARY – TUE 05 FEBRUARY 2008 (06:00 GMT)

· U.S. Dollar Trading (USD) was subject to a calmer session. Although still pressured against a number of majors due to an unexpected contraction in the Non Farm Payrolls for December by -17 k jobs (Forecast +63K), the market heavily considers whether the FED has actually taken and promised satisfactory steps to handle the current mild recessional economic environment. Traders expect further rate cut from the Federal Reserve in the next meeting. Nonetheless, any further losses to the USD may be limited and USD appreciation due to market recovery can not be excluded. There seem to be heavy interests in selling the EUR at its rallies as long as the EU ECB doesn’t assure it has inflation and growth fully under control. Equity markets fell slightly on MON as a corrective move to FRI gains.

· The Euro (EUR) remained fairly range bound and solid above the 1.48 from where the market will probably start pricing in the ECB rate decision coming on THU. EU equity markets remained steady in small positive. The market saw a little changed PPI reading which did not affect the rate much. Today we expect EU PMI little changed from previous and improved numbers in EU Retails sales

· The Japanese Yen (JPY) once again tracked equity markets, with a rally in Asian stock prices pressuring the JPY during early hours MON, and a consequent Asian markets correction tonight giving the JPY strong support; an overall cycle in carry-trading. The USDJPY traded with a low of approx. 106.58 and a high of 107.10.

· The Sterling (GBP) rose the most against the dollar in more than a week and climbed versus the EUR as a rally in European and Asian stocks spurred demand for higher- yielding currencies. Today’s House price index may re-confirm a slowing housing market and hence raise expectations for a rate cut to take place on THU. Overall, the GBP climbed against the USD from the lowest in two weeks, rising to $1.9761 by 4:20 p.m. in London, from $1.9651 at the end of last week. The U.K. currency gained to 75 pence per EUR, from 75.31 pence.

· The Australian Dollar (AUD) was initially sold off slightly up to of the well expected rate hike by RBA, but RBA comments signaling a next future hike gave it a boost up to 0.9090 levels from which it retreated to support of 0.9060.

· Gold (XAU) continued its step-wise sell-off but recovered from 890 levels finally slightly above the 900 level, as FED rate cuts add confidence to the market that the credit crisis gets under control. Oil also remained below the 90 level although Turkey’s military attacks in Kurdish areas of northern Iraq raised expectations of a price rise.

TECHNICAL COMMENTARY

· Euro – 1.4820

Initial support is at 1.4810 followed by 1.4785. Resistance is located at 1.4898 followed by 1.4925

· Yen – 106.80

Initial support is at 106.65 followed by 106.35. Initial resistance is at 107.05 followed by 107.45

· Pound – 1.9720

Initial support is at 1.9655 followed by 1.9630. Initial resistance is at 1.9785 followed by 1.9820

· Australian Dollar – 0.9075

Initial support is at 0.9035 followed by 0.9005. Initial resistance is currently at 0.9090 followed by 0.9140

· Gold – 901.50

Initial support is at 899 followed by 890. Initial resistance is at 906 followed by 917

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Non Farm Payrolls Contract By -17k Jobs, Although Stock Prices Rally

CURRENCY TRADING SUMMARY – 04 FEBRUARY 2008 (06:30GMT)

· U.S. Dollar Trading (USD) was subject to a volatile session, pressured against a number of majors due to an unexpected contraction in the Non Farm Payrolls for December by -17 k jobs (Forecast +63K), adding further concerns in anticipation of a US recession. The data confirmed the first decline in 4 years, as an upward revision from 18K to 81k in the month of December did little to ease the concerns. The data has prompted traders to expect further rate cuts from the Federal Reserve in the next meeting. Nonetheless, any further losses to the USD were limited as equity markets rose on Friday, boosted by reports of a takeover bid by Microsoft for Yahoo. In U.S share markets the NASDAQ was up 23.50 points (+0.98%) whilst the Dow Jones was also up by 92.83 points (+0.73%). Crude oil was also higher by the end of the New York session, gaining by US$0.34 a barrel to US$89.30. In other news, the Manufacturing ISM index rose to 50.7, above expectations of 47.3.

· The Euro (EUR) surged on the back of the poor jobs data out of the US on Friday, testing a record high, before any further gains were limited on profit taking. Furthermore, the EURO failed to sustain it gains as rallying US stocks, revived the greenback. Overall the EURUSD traded with a low of 1.4785 and a high of 1.4952 before closing the day at 1.4798 in the New York session. Euro zone PPI figures are scheduled for release on Monday with forecasts lying at 0.1% (Previous: 0.8%)

· The Japanese Yen (JPY) once again tracked equity markets, with a late rally in US stock prices a cause for a pressured Yen. Overall the USDJPY traded with a low of 105.74 and a high of 106.73 before closing the day at 106.61 in the New York session.

· The Sterling (GBP) saw a disappointing reading in Manufacturing PMI coming in at 50.6, down on the forecasted 52.5, hitting record lows for output, adding to further expectations the BoE will cut its interest rate later this week. Overall the GBPUSD traded with a low of 1.9646 and a high of 1.9942 before closing the day 1.9650 in the New York session. Services PMI will be made public today with forecasts lying at 52.0 (Prior: 52.4)

· The Australian Dollar (AUD) was the best performing major on Friday buoyed by poor US jobs data and growing expectations that the RBA would move to increase interest rates on Tuesday the 5^th of February, by 25 bps. Overall the AUDUSD traded with a low 0.8944 and a high of 0.9047 before closing the day at 0.9039 in the New York session. Trade Balance on Monday narrowed for the second consecutive month to -1963 mln, from a revised previous figure of -2162 mln.

· Gold (XAU) was worst affected from rebounding prices, XAU traded with a low 904.70 and a high of 936.50, before ending the session at 910.00

TECHNICAL COMMENTARY

· Euro – 1.4815

Initial support at 1.4755 (Jan 30 low) followed by 1.4661 (38.2% retracement of the 1.4366 to 1.4953 advance). Resistance is now located at 1.4880 (intraday pivot point) followed by 1.49668 (Nov 23.2007 trend high).

· Yen – 106.80

Initial support is located at 105.77 (Feb 1 low) followed by 104.97 (Jan 23 low). Initial resistance is now at 106.87 (Jan 31 high) followed by 107.47 (Jan 30 high)

· Pound – 1.9665

Initial support at 1.9576 (61.8% retracement of the 1.9338 to 1.9660 advance) followed by 1.9500 (Jan 24 low). Initial resistance is now at 1.9941 (Feb 1 high) followed by 2.0034 (Jan 30 low)

· Australian Dollar – 0.9045

Initial support a 0.8944 (Feb 1 low) followed by 0.8944 (Jan 31 low). Initial resistance is now at 0.9051 (Feb 1 low) followed by 0.9061 (61.8% retracement of the 0.9400 to 0.8513 low)

· Gold – 910.10

Initial support at 903.80 (Feb 1 low) followed by 876.80 (Jan 23 high). Initial resistance is now at 936.80 (Feb 1 high) followed by 950.0 (Psychological round number)

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