Australia’s approaching federal elections and potential tax cuts seem to have buoyed consumer confidence. Economic indicators remain positive despite the RBA’s increased inflation forecast, and point toward an interest rate hike, probably deferred until the first half of 2008. Amid the international credit crunch the world’s major banks scramble for liquidity and are likely to pass on their own increased costs of borrowing to Australian consumers without waiting for an official rate hike.

AUD lost 3.4% against the U.S. dollar this past forex trading week, contributing to making it the worst performer of the 16 major currencies. Risk aversion continues rising as the global credit crunch chews on investor confidence, and AUD carry trades funded with the Japanese yen have grown less popular. The pair broke through last week’s support at 0.9126 on Monday 12 November and consolidated below 0.9060 and above 0.8835. Initial resistance is at 0.8941 followed by 0.9027; initial support is 0.8826 followed by .08767 and the key level of 0.8752. The price must sustain above 0.9060 to signal a turnaround for the currency pair.

More U.S. housing data will be released this next week; although a slight bounce in the numbers is possible, the housing market remains glutted and the correction should continue. Local gasoline prices have finally climbed to follow soaring oil prices, and the U.S. consumer, comprising approximately 70% of the world’s largest economy, is finally showing signs of unease. Bank writedowns of over US$50Bn have been announced as of this date and that trend will also unfortunately continue. Changes in the FOMC’s communications may signal trends more clearly for forex traders in future.

A possible slowing of growth in the Eurozone and investors running for the shelter of U.S. government debt saw the USD gain 0.2% against the EUR on profit taking and consolidation although the long-term trend remains up and 1.50 remains possible. Initial support is at 1.4605 followed by 1.4570; initial resistance is at 1.4685 followed by a key level at 1.4725.

The Canadian dollar gained 20% against the USD this year but depreciated 3% this past week, mainly on concerns a U.S. recession might slow Canada’s exports, already down due to CAD strength. The USD/CAD remains volatile; this past week bucks the overall downward trend, perhaps signaling a forex trading reversal. The strong rebound meets its first resistance at 0.9800 followed by 0.9875, and support at 0.9705 followed by 0.9655.

The internal Japanese economy seems sluggish but strong exports drive the numbers; unwinding carry trades strengthened the JPY against USD and EUR. The USD/JPY tested 109.00 but rebounded to 110.92 although the trend remains down. Initial support is at 109.30 followed by 108.95; resistance is at 112.00 and 112.50.

The pound sterling took a beating on early signals of anticipated BoE interest rate cuts that included warnings of the credit crunch hitting the U.K. economy hard in 2008. The GBP headed south against 12 of 16 major currencies and lost 1.9% against USD in one week, down from 2.0835 and closing at 2.0521. Initial resistance is at 2.0538 (38.2% of a possible Fibonacci retracement) followed by 2.0597 (50%) and 2.0654 (62.8%). Initial resistance is at 2.0475 followed by 2.0448.