Australian FOREX Daily Outlook 06/02/2006

MARKET SUMMARY –06FEB06 (05:00GMT)

• The Dollar rose against the major currencies on Friday night, on fears that the tightening US job market may prompt further rate hikes from the Fed. US non-farm payrolls posted at 193k in January, below the expectation of 250k. Looking behind the headline figure reveals a stronger picture. There were upward revisions to November and December payrolls totalling 81k. Applying these revisions to the January result gives an above-consensus outcome of 274k. The unemployment rate fell from 4.9% to 4.7%, the lowest since July 2001. The other data released was US ISM manufacturing which came in weaker than expected for January. It fell to 56.8 from an upwardly revised 61.0 in December. The market was expecting an outcome of 60.0. As with the manufacturing survey, the key components are all above their historical averages and are above 50 so are indicative of expansion. University of Michigan consumer sentiment fell marginally to 91.2 versus expectations of 93.In other markets stocks fell on Friday with investors fearing that the Fed will continue to raise interest rates in response to signs of a tighter job market. The Dow Jones fell by 58pts and the NASDAQ fell by 19pts. Crude oil rose by US69c to US$65.37 a barrel. Investors are getting ready for higher oil prices as Iran stays defiant and said it would resume uranium enrichment and end United Nations inspections of its nuclear sites.

• The Euro traded down from 1.2103 to as low as 1.1968, before closing at 1.2025 in New York. The Euro weakened on the back of the revised payroll data but recovered slightly after other US data releases were softer than expectations. Data released in Eurozone showed Euro PMI services reported at 57.0, in line with consensus and at a new 2 year high. Eurozone retail sales also met expectations for a 0.1% m/m rise. Looking ahead, the market will focus on German manufacturing orders released later today.

• The Japanese yen fell from JPY118.35 per US dollar to JPY119.39, before closing in New York at JPY118.95. In Japan later today, will see the release of the leading indicators.

• The Sterling fell from 1.7800 to as low as 1.7594, before closing in New York at 1.7625. Sterling slipped to a two-week low against the dollar after relatively strong U.S. jobs buoyed the greenback across the board. Sterling sentiment was also soured by a record number of individual insolvencies and a surge in court orders for repossession of homes at the end of 2005 in England and Walesand a survey showing UK service sector activity eased more than expected in January.

• The Aussie traded down from 0.7535 to as low as 0.7475, before closing in New York at 0.7490. The Aussie suffered as the gold prices eased as well on Friday. Gold fell by US$5.20 an ounce to US$571.60 an ounce.

TECHNICAL COMMENTARY

• Euro 1.2020

Initial support at 1.1968 (Feb 3 low) followed by 1.1900 (61.8% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.2113 (Feb 2 reaction high) followed by 1.2190 (Jan 31 high).

• Yen 118.60

Initial support is located at 116.69 (Jan 31 reaction low) followed by 116.12 (Jan 27 reaction low). Initial resistance is now at 119.52 (76.4% retracement of 121.41 to 113.41) followed by 120.08 (Dec 14 high).

• Pound – 1.7605

Initial support at 1.7532 (Jan 19 low) followed by 1.7437(61.8% retracement of the 1.7133 – 1.7930 rally). Initial resistance is now at 1.7880 (Reaction high from Jan 27) followed by 1.7930 (Jan 25 high).

• Aussie – 0.7470

Initial support at 0.7446 (Jan 19 low) followed by 0.7366 (61.8% retracement of the 0.7235 to 0.7577 climb). Initial resistance at 0.7589 (Jan 31 high and area of) followed by 0.7601 (Oct 27 high).