Australian FOREX Daily Outlook 03/01/2006

MARKET SUMMARY – 03/01/06(03.00GMT)

• The Dollar was mostly firmer against major currencies on Friday in the New York and London sessions. However there was little driving the market apart from the year-end position squaring. US sharemarkets eased on the Friday with investors fearing that the rebound in oil prices above US$60 a barrel could weigh on consumer spending and corporate profits. The Dow Jones fell by 67 pts while the NASDAQ lost 13 pts. US treasuries eased on Friday (yields higher) as traders expect solid readings from this week’s batch of economic data. The New Year gets off to a busy start with the release of key December ISM and FOMC minutes of the Dec 13 meeting. The market forecasts are centered on 57.0 for the manufacturing ISM data.The minutes to the December FOMC meeting will also be important, with market participants looking for insight into the meaning of the “some further measured policy firming” phrase contained in the last statement.
  

• The Euro traded between 1.1781 and 1.1877 in the European and US sessions, before closing near 1.1815 in New York. In the Eurozone later today sees the release of retail sales and unemployment in Germany with Q3 GDP out in France. German retails sales for November is expected to be down 0.3% yoy. Unemployment is expected to be down 11.5k leaving the unemployment rate unchanged at 11.5%. The French economy is expected to have grown by 0.7% in the 3^rd quarter.
  

• The Japanese yen traded between 117.19 and 118.07 in the European and US sessions, before closing near 117.80 in New York. In contrast to the States and Eurozone the start to the year in Japan will be quiet with holidays yesterday and today.
  

• The Sterling traded in a range of 1.7200 and 1.7240 in the European and US sessions, before closing near 1.7215 in New York. PMI manufacturing for December is due out later today in the UK. The market forecasts is centered on 51 which would match the previous reading. Stable PMI readings and more signs of stability in the housing market may cause the MPC to hold off on any near term easing prospects.
  

• The Aussie drifted in a range from 0.7314 to 0.7350, ending the New York session largely unchanged at 0.7330. The index that measures Australian manufacturing production was released today and rose 8.9 points to 53.1 in December from November. A reading above 50 indicates industries are expanding.

TECHNICAL COMMENTARY

• Euro – 1.1875

The market finally got a break of a two week old trading range with a move below the support at 1.1800 (61.8% retracement of 1.1638 to 1.2062) on Friday. However this move was short lived with the next support at 1.1778 (Dec 30 low) holding. Therefore these parameters remain in play on the downside. The topside resistance levels are located firstly at 1.1930 (Dec 28 high), followed closely by 1.1954 (61.8% retracement of 1.2062-1.1778 decline).

• Yen – 117.25

The first support is located at 116.97 (reaction low) followed closely by 116.82 (61.8% retracement of 115.98 to 118.18). A move above 118.18 (Dec 29 high) could open the door for a test of 119.16 (61.8% retracement of the 121.41 to 115.52 decline).

• Pound – 1.7280

The initial resistance is located at 1.7303 (61.8% retracement of the 1.7410-1.7129 downswing). A break of this level would give sterling some room to rise with next resistance level not found until 1.7410 (Dec 28 reaction high). A breach of mild support at 1.7193 (61.8% of 1.7129 to 1.7297), would open the door for a test of the 1.7129 trend low.

• Aussie – 0.7370

The Aussie continues to work higher from this week’s 0.7233 low, and targeting the resistance at 0.7372 (Dec 21 reaction high) area. Aussie is unlikely to run away unless it can break above the next resistance at 0.7406 (50% retracement of the 0.7578 – 0.7235 decline). Initial support is located at 0.7235 (Dec 27 low and 61.8% area of 0.6781 – 0.7989), followed by 0.7190 (Oct 4 low).