Australian FOREX Daily Outlook 07/02/2006

MARKET SUMMARY –07FEB06 (05:00GMT)

• The Dollar continued to strengthen against the major currencies overnight in the absence of any major economic data releases. The key event in the States was the swearing in of Ben Bernanke as US Federal Reserve chairman. Bernanke made no mention of the current state of the economy in his brief acceptance speech. In other markets, share indexes held in tight ranges with little in terms of economic or corporate news to provide direction. The Down Jones closed up 5pts while the NASDAQ was down 4pts. Oil prices initially rose overnight after Iran ended United Nations inspections of its nuclear sites but prices retreated, as investors were comforted by assurances by Iran that it would not use oil as a political weapon. Crude oil fell by US26c to US$65.11 a barrel after hitting US$66.62 at one point.

• The Euro traded down to a 1 month low of 1.1945 from 1.2028, before closing in New York at 1.1965. The Euro suffered from the strength of the dollar across the board and softer than expected German factory orders. Factory orders fell by 1.6% in December, weaker than the market consensus looking for a 0.6% rise. The market will now focus on German industrial production due out later today.

• The Japanese yen fell from JPY118.48 per US dollar to JPY119.09, again ending the New York session near its lows. Yesterday in Japan, the December leading index rose to 80% from 54.7% in November, The coincident indicator of current activity rose to 100% from 70% the previous month. Japan’s leading index in considered an excellent indicator of turning points in the economy. It is still suggesting that the economic expansion remains on track.

• The Sterling fell from 1.7610 to 1.7470, closing near its lows in New York. The markets are awaiting several economic data this week including the key UK retail sales from the British Retail Consortium, the UK trade balance which is expected to show some improvement in exports and the Bank of England’s policy meeting which is expected to keep interest rate on hold this Thursday.

• The Aussie traded down from 0.7474 to 0.7413, ending near the day’s lows in New York. Australian labour force in released tomorrow with the market looking for jobs growth of +20,000 in January. This will see the unemployment rate at 5.1%.

TECHNICAL COMMENTARY

• Euro 1.1970

Initial support at 1.1945 (Feb 6 low) followed by 1.1900 (61.8% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.2047 (Feb 6 high) followed by 1.2113 (Feb 2 reaction high).

• Yen 118.95

Initial support is located at 117.87 (Feb 2 low) followed by 116.69 (Jan 31 corrective low). Initial resistance is now at 119.41 (Feb3 high) followed by 121.07 (Dec 12 high).

• Pound – 1.7485

Initial support at 1.7438 (61.8% retracement of the 1.7129 to 1.7937 advance) followed by 1.7320 (76.4% retracement of the 1.7129 to 1.7937 advance). Initial resistance is now at 1.7597 (38.2% retracement of gains from 1.7860) followed by 1.7643 (Feb 6 high).

• Aussie – 0.7425

Initial support at 0.7369 (61.8 retracement of the 0.7233 to 0.7590 advance) followed by 0.7317 (76.4% retracement of the 0.7233 to 0.7577 climb). Initial resistance at 0.7522 (61.8% retracement of decline from 0.7590) followed by 0.7590 (Feb1 high).