GBPUSD..Disappointing Recovery Feeds Pessimism: The morning's Confederation of British
Industry's industrial trend report came in with… … a headline number that was below
expectations at -27, with 39% of companies still reporting below normal levels of
orders. The index was forecast to rise to -25 from -29. Despite worries over rising
costs, a balance of 8% of manufacturers still expect to be raising prices in the
near future, which will mean even tighter profit margins for the already struggling
sector. On top of the disappointment in manufacturing, the rest of the economy is
facing disheartening prospects as well with the IMF reducing their real GDP growth
forecasts for 2005 and 2006 to 1.9% and 2.2%, respectively, from previous forecasts
of 2.6% for both years. The IMF staff cited pending effects of earlier highs in oil
prices and Euro-area weakness as downside risks going forward.

M&A Rumors: Whispers of a possible takeover bid for Spain's largest oil company,
Repsol, by British Petroleum contributed to the Cable's losses today. Such a deal
would constitute a sizeable capital outflow for the UK since Repsol's market cap is
upwards of €31 billion. On the other hand, these are mere rumors which contributed
to today's bearish mood but it is far from being a definite occurrence.

Technically Speaking: The GBPUSD has been floating around the 38.2% fib of its
recent slide for a few days now and the early morning test of the level sent the
pound on an unrelenting drop for the rest of the day. The fall from the day's high
of 1.8150 was compounded further by the rumored clustering of sell interest around
1.8120. Without any big stories coming out for either side of the pair tomorrow,
price action may stay around the 1.7960 resistance before moving any lower.

AUDUSD

Fall In Commodity Prices Brings Aussie Down: Spot gold prices plummeted to $465.30
at the close of the New York session after hitting 18-year highs earlier. This
occurred as oil prices fell very slightly in the day on a downgrade of Hurricane
Rita to a Category 4 storm from Category 5. Unfortunately, this small dip wasn't
enough to allay fears of dropping exports. For a country whose GDP consists of 10%
raw materials (mostly metals), the economy is naturally very dependent on global
growth and demand for these products. Hence, any situation involving falling metals
prices and strength in crude will create a double whammy for the Aussie and
potentially result in the type of drop seen today.

Technically Speaking: With the pair breaking a previously cited support of .7650 and
forming a triple bottom at the .7615 level, which is also the 50% retracement mark
of an earlier rally. At this point, the pair could move both ways with a break lower
towards .7500 possible. At the same time, if the Aussie heads up past the .7650
support which it broke, it could drift to .7700 again with rumored buy orders living
in that region possibly sending the pair even higher.

NZDUSD

Further Interest Rate Concerns: The same commodity price situation which gripped the
Aussie also hit the Kiwi today. However, an additional worry in New Zealand
surrounds the future of the country's interest rate. Just last week, Reserve Bank
Governor Alan Bollard had been discussing a possible hike due to inflation risks.
Monetary authorities are under agreement to keep the CPI between 1-3%. Quarterly
data has shown the figure at 2.8% for the first half of the year, dangerously close
to the upper limit. Despite this, current and forthcoming economic weakness may
prevent authorities from raising the interest rate before the end of this year, as
previously discussed. With at least one more rate hike expected from the US, another
blow will be dealt to the interest rate advantage that the NZD had been enjoying.

Technically Speaking: The kiwi broke lower today to three-week lows today on heaving
selling from large names in Switzerland. At this point, with the NZDUSD somewhat
oversold, there could be some hesitation before the pair moves back up to greet a
resistance around .6980, which was a former support.

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