CURRENCY TRADING SUMMARY

· U.S. Dollar Trading (USD) was mixed against a number of majors as reports surrounding Manufacturing ISM eased slightly from 50.9 to 50.8 for the month of Nov, yet higher than the mean forecast pf 50.4. The data confirmed its fifth consecutive decline and it lowest reading since January. In U.S. share markets the NASDAQ was down -23.83 points (-0.90%) whilst the Dow Jones -57.15 points (-0.43%). Crude Oil was up by US$0.91 a barrel to US$89.48.

· The Euro (EUR) rebounded from its previous session of declines as manufacturing data out of the U.S. confirmed it grew at it’s slowest pace in 10 months. Coupled with the Eurozone manufacturing accelerating for the month of November as PMI was above expectations of 52.6, coming in at 52.8 (Previous: 51.7). The EURUSD traded with a low of 1.4621 and a high of 1.4708 before closing the session at 1.4659 at the end of the New York session. PPI for the month of October is scheduled for release out of the Eurozone on Tuesday with forecasts at 0.4%/3.1% for the m/m and y/y.

· The Japanese Yen (JPY) was able to gain against a number of majors during the session as concerns continue to surround the market that losses in credit markets may worsen further. As a result the low interest bearing Japanese currency was reprieved of much of its role in funding more attractive yield currencies. The Japanese yen was able to rebound from two week lows against the dollar as Moody's Investors Service said it is preparing the biggest credit-rating cuts since sub-prime mortgages first shook the financial markets. Overall the USDJPY traded with a low of 110.14 and a high of 111.05 before closing the session at 110.43 at the end of New York.

· The Sterling (GBP) edged higher versus the dollar on speculation that the UK economy had not slowed enough to warrant a rate cut by the BoE. In data news, the Sterling Pound was buoyed by reports which had shown manufacturing had quickened unexpectedly for the month of November (Actual: 54.4; Forecast: 52.5) adding further support to the likelihood that the BoE would look to hold rates for the remaining part of 2007. The GBPUSD traded with a low of 2.0526 and a high of 2.0679 before closing the session at 2.0666 at the end of New York. Retail Sales for the UK was released at 1.2% above the previous 1% during the early part of the Asian Session.

· The Australian Dollar (AUD) rose from levels below the key 88 cent mark despite carry trades being out of favor with the investors. Nonetheless, the Aussie traded within tight ranges having a low of 0.8788 and a high of 0.8854 before closing the day at 0.8842 in the New York session. Retail sales for the month of October were released at 0.2% below the consensus of 0.6% (Previous: 0.8%)

· Gold (XAU) bounced of key support levels once again failing to break 800 marks. XAU traded with a low of 777.80 and a high of 791.40.



TECHNICAL COMMENTARY


Currency Sup 2 Sup 1 Spot Res 1 Res 2
EUR/USD 1.4602 1.4617 1.4665 1.4859 1.4908
USD/JPY 108.27 109.48 110.50 111.33 111.76
GBP/USD 2.0519 2.0534 2.0640 2.0833 2.0846
AUD/USD 0.8720 0.8776 0.8795 0.8321 0.8939
XAU/USD 773.00 778.90 792.10 808.05 815.70



· Euro – 1.4665

Initial support at 1.4617 (Nov 19 low) followed by 1.4602 (61.8% retracement of the 1.4010 to 1.4968 advance). Initial resistance is now located at 1.4859 (Nov 28 high) followed by 1.4908 (Nov 27 high).

· Yen – 110.50

Initial support is located at 109.48 (Nov 28 low) followed by 108.27 (Nov 26 low). Initial resistance is now at 111.33 (38.2% retracement of the 117.95 to 107.23 decline) followed by 111.14 (Nov 14 high)


· Pound – 2.0640

Initial support at 2.0534 (Nov 30 low) followed by 2.0519 (Nov 23 low). Initial resistance is now at 2.0833 (Nov 28 high) followed by 2.0846 (Nov 14 high)

· Australian Dollar – 0.8795

Initial support a 0.8776 (Nov 29 low) followed by 0.8720 (Nov 28 low). Initial resistance is now at 0.8921 (Nov 28 high) followed by 0.8939 (38.2% retracement of the 0.9400 to 0.8654 decline)

· Gold – 792.10

Initial support at 778.90 (Nov 30 low) followed by 773.0 (Nov 20 low). Initial resistance is now at 808.05 (Nov 29 high) followed by 815.70 (November 27 high)

An overview of the Forex market

The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.

The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:


24-hour trading, 5 days a week with non-stop access to global Forex dealers.
An enormous liquid market making it easy to trade most currencies.
Volatile markets offering profit opportunities.
Standard instruments for controlling risk exposure.
The ability to profit in rising or falling markets.
Leveraged trading with low margin requirements.
Many options for zero commission trading.


Forex trading
The investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.

However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.