Australian FOREX Daily Outlook 20/01/2006

MARKET SUMMARY – 20/01/06(03.00GMT)

• The Dollar was mixed against the major currencies overnight in choppy trade. An audio tape confirmed to be Osama Bin Laden sparked some dollar selling nut could not be sustained. On the data front, there were 1,933k housing starts in the US in December, below the markets expectation of 2,035k. There were also 2,068k building permits, below the market expectation of 2,100k. The weaker than expected housing data is evidence that higher interest rates are starting to slow the housing market. US jobless claims fell unexpectedly last week to 271k, down 36k from the previous week. Initial claims are now at their lowest level since April 2000. The Philly Fed survey showed slowest growth since June 2005 at 3.3 in Jan vs. 10.9 in Dec. In other markets, US stocks rose as Pfizer and Merrill Lynch produced strong profit results. The Down Jones finished 26pts higher with the NASDAQ up 22pts. Crude oil rose on continued concerns over geopolitical tensions in Iran and Nigeria. Crude oil ended up US$1.10 higher at US$66.83 a barrel. Looking ahead, in the States later today will see the release of the university of Michigan consumer sentiment index. Market consensus is looking for a slight improvement to 92.5 in January compared with 91.5 in December.

• The Euro traded in a range of 1.2055 to 1.2123, before closing in New York at 1.2095. Euro rallied to its highs on the Osama Bin Laden tape but the move could not be sustained.The Eurozone CPI rose 0.3% in December, in line with markets expectation. Annual CPI inflation fell to 2.2% from 2.3%, continuing the fall in headline inflation since October 2005. Despite the recent easing, CPI inflation remains above the ECB’S 2% target and analysts believe inflation risks are to the upside.

• The Japanese yen steadied after a recovery in the stock market and traded in a range of 114.95 to 115.46, before closing in New York near its highs. Yesterday in Japan the Nikkei came back sharply after slipping more than 5% in the last 2 days. The Nikkei had a 2.31% gain making it the biggest on day rise since October and help the yen to recover back towards the 115.00 level. Today sees the BOJ end its two day meeting with the market not looking for any change in monetary policy.

• The Sterling traded in a range of 1.7529 to 1.7637, before closing in New York at 1.7595. With no major data releases from the U.K. the sterling followed the general movements of the dollar. In the UK later today sees the release of retails sales data for December, including the Christmas shopping period. The market is looking for retails to come in at 1.75%.

• The Aussie traded in a range of 0.7445 to 0.7484, before closing in New York at 0.7465. The Aussie stayed firm as gold rallied by more than $15 overnight. Gold rose from US$ 542.00 to $US559.50 following the Osama Bin Laden audio tape incident.

TECHNICAL COMMENTARY

• Euro – 1.2080

Initial support at 1.2007 (Jan 12 low) followed by secondary support at 1.1980 (50% retracement of the 1.1778 to 1.2181 advance). Initial resistance is now located at 1.2181 (Jan 6 high) followed by 1.2226 (61.8% retracement of the 1.2590 to 1.1638 decline).

• Yen – 115.60

Initial support is located at 114.62 (Jan 17 low) followed by 113.79 (Jan 16 low). Initial resistance is located at 115.91 (Jan 17 high &amp trendline resistance area) followed by 116.35 (61.8% of 118.16-113.41 decline and near Jan 5 high).

• Pound – 1.7560

Initial support is located at 1.7523 (Jan 11 low) followed by 1.7490 (Jan 4 low). Initial resistance is located at 1.7810 (Dec 14 high) followed by 1.7901 (Oct 27 high).

• Aussie – 0.7485

Initial resistance is located at 0.7580 (Dec 14 high) followed by 0.7605 (Oct 27 high). Initial support is located at 0.7446 (38.2% retracement of the 0.7235-0.7577 high) followed by 0.7406 (50.0% retracement of the 0.7235-0.7577 high).