NEWS / Foreign Exchange

USD Awaits Housing Data

10/23/2007 11:15 PM: EUR/$..1.4259 $/JPY..114.72 GBP/$..2.0506 $/CHF..1.1726 AUD/$..0.9025 $/CAD..0.9661

USD Awaits Housing Data

At 4:00 AM Eurozone October Manufacturing PMI (exp 53.0, prev 53.2)
Eurozone August Current Account Surplus (exp 2.0 bln euros, prev 1.7 bln euros)
Eurozone October services PMI (exp 54.5, prev 54.2)
At 10:00 AM US September Existing Home Sales (exp 5.25 mln units, prev 5.5 mln units)

The greenback continues to struggle against the majors, falling sharply against the Australian dollar on burgeoning rate hike expectations for the RBA. Meanwhile, economic data from the US suggests further deterioration in the housing market ??“ thereby raising the question of whether there will be spillover effects onto other parts of the economy, namely consumer spending. In the session ahead, traders will digest September existing home sales, which is seen slumping further to 5.25 million units, down from 5.5 million units from August.

Aussie Jumps on Rate Hike Expectations

The Australian dollar spiked higher against the yen and greenback in early Wednesday trading following a report revealing higher than expected inflation, fuelling sentiment that the RBA will have to resume hiking interest rates. The Aussie powered through the 0.90-level against the dollar and crept higher towards the 104-level versus the yen.

Australia??™s Q3 weighted median CPI outpaced consensus forecasts, climbing by 0.9% q/q and 3.1% y/y. The report raises the chances of an RBA rate hike next month, with the Australian bond market now pricing in an 83% chance for a 25 basis point rate hike in November.

AUDUSD trades near 0.9045, with resistance seen at 0.9075, followed by 0.91 and 0.9130. Subsequent ceilings are eyed at 0.9165 and 0.92. On the downside, support is seen at 0.90, followed by 0.8970 and 0.8940. Additional floors will emerge at 0.89 and 0.8850.

Yen Edges Higher on Record Surplus

The yen climbed against the majors following a record trade surplus up 62.7% to 1.637 trillion yen in September. The exports component was up 6.5% while the imports component fell by 3.2%.

USDJPY trades at 114.75, with interim resistance seen at 115, followed by 115.40 and 115.75. Additional ceilings are seen at 116 and 116.40. Support is seen at 114.50, backed by 114 and 113.60.