Australian FOREX Daily Outlook 28/02/2006

28FEB06 (05:00GMT)MARKET SUMMARY –

• The Dollar gravitated in tight ranges against the major currencies overnight with little in the way of fundamental news to provide direction. US new home sales fell by 5% in January to 1.233 million units, below forecasts centered on a result near 1.26m. The supply of homes stood at 5.2 months, the largest since November 1996. In other markets, US sharemarkets made some gains as easing oil prices reduced concerns about the impact of higher energy costs. The Dow Jones was up by 35pts while the NASDAQ was up 20pts. Crude oil prices retreated overnight, falling by US$1.91 to US$61.00 a barrel. Looking ahead, preliminary GDP (QIV) and consumer confidence is released later today in the States. The advance estimate of QIV GDP growth was much slower than expected at only 1.1%. Markets expect the preliminary (more comprehensive) estimate to be stronger at 1.5%. US Conference consumer confidence is expected to moderate marginally in February following a stronger than expected outcome in January. In February, confidence is expected to decline slightly to 105 from 106.3 in January.

• The Euro traded in a range of 1.1837 to 1.1869, before closing at 1.1845 in the New York session. In the Eurozone yesterday, stronger than expected money supply data for January has made a March 2 ECB rate hike odds-on. M3 rose to 7.6%pa in January, with the monthly rise of 0.8%.

• The Japanese yen in a narrow range of 115.91 to 116.28, before closing at 116.10 in the New York session. A series of comments by senior politicians yesterday suggested that the government will accept the BOJ’s judgment on when to end quantitative easing policy. However, members of the government still have some reservations, and importantly Finance Minister Tanigaki said this morning that Japan is still in mild deflation, and that the BOJ should only end quantitative easing policy based on earlier promised conditions. On the data front, Japan‘s industrial production rose 0.3 percent in January from a month earlier, slightly short of forecasts, but economists saw the sixth straight monthly increase as a sign that the upward trend is continuing.

• The Sterling traded in a range of 1.7376 to 1.7458, before closing at 1.7400 in the New York session. In the UK yesterday, the Hometrack house price measure showed strong gains for February.

• The Aussie traded in a tight range of 0.7370 to 0.7394, before closing near its lows in the New York session. In Australia today, fourth-quarter current account deficit widens to A$14.45 billion ($10.7 billion) compared with an expected A$13.6 billion. Net exports to detract 0.5 percentage points from gross domestic product, larger than the 0.3 percentage point drag forecast.

• Gold prices fell in line with oil, reversing Friday’s gains. Gold fell by US$4.20 to US$557.00 an ounce.

TECHNICAL COMMENTARY

• Euro 1.1860

Initial support at 1.1848 (Feb 16 low) followed by 1.1800 (76.4% retracement of the 1.1638 to 1.2324 advance). Initial resistance is now located at 1.1935 (Feb 24 high) followed by 1.1976 (Feb 20 high).

• Yen 116.20

Initial support is located at 115.70 (61.8%% retracement of the 113.41 to 119.41 advance) followed by 114.14 (Jan 23 low). Initial resistance is now at 117.17 (Feb 24 high) followed by 118.54(Feb 23 high).

• Pound – 1.7435

Initial support at 1.7375 (Feb 22 low) followed by 1.7306 (Feb 16 low). Initial resistance is now at 1.7453 (Feb 27 high) followed by 1.7556 (Feb 10 high).

• Aussie – 0.7380

Initial support at 0.7343 (Feb 22 low) followed by 0.7317 (Feb 17 low). Initial resistance at 0.7424 (Feb 23 high) followed by 0.7444 (Feb 15 high).