Australian FOREX Daily Outlook 22/02/2006

MARKET SUMMARY –22FEB06 (05:00GMT)

• The Dollar traded sideways against the major currencies in another subdued overnight session as the FOMC provided no surprises. Minutes from the Federal Reserve meeting of January showed that members though rates were near where they needed to be and that further rate hikes would depend on the flow of economic data. On the data front, the US leading index rose by 1.1% in January, well above expectations centered on a 0.6% rise. In other markets US shares fell overnight with the Dow Jones down 46pts and the NASDAQ was down 22pts. Crude oil prices rose again overnight on continued concerns about the disruption of production and exports in both Nigeria and Ecuador. Crude oil rose by US$1.22 to US$61.10 a barrel. Looking ahead and the CPI will be released later today in the States. The US CPI is expected to rise by 0.5% in January, following a 0.1% fall in December. The core CPI is expected to rise by 0.2% for a fourth consecutive month, following modest monthly increases of 0.1% throughout most of the June and September quarters.

• The Euro traded in a narrow range of 1.1890 to 1.1929, before closing at 1.1910 in the New York session. The key data releases for the Eurozone later today will be the update of German Q4 GDP, French INSEE Business Climate survey and Consumer Spending and Italian consumer confidence [ ISAE survey]

• The Japanese yen traded in a range of 118.43 to 119.00, before closing at 118.70 in the New York session.

• The Sterling traded in a range of 1.7415 to 1.7475, before closing at 1.7460 in the New York session. In the UK later today, the market will focus on the minutes of the Bank of England’s last monetary policy meeting for clues on UK interest rates. Some analysts said they could offer further support for the GBP after the bank’s quarterly inflation report last week dampened expectations for an interest rate cut.

• The Aussie traded in a range of 0.7373 to 0.7401, before closing at 0.7385 in the New York session. In Australia today, wages rose at a slower pace than expected last quarter, suggesting a tight labour market was not yet a threat to inflation and arguing against the need for an increase in interest rates.That view was reinforced by Reserve Bank of Australia (RBA) Deputy Governor Glenn Stevens who told a financial services conference inflation was well contained and inflationary risks balanced. Government figures on Wednesday showed total hourly rates of pay excluding bonuses rose a seasonally adjusted 0.9 percent in the final quarter of 2005, below the 1.1 percent expected by analysts.

• Gold was higher overnight, in line with firmer oil and base metal prices. Gold rose by US$2.00 an ounce to US$556.60.

TECHNICAL COMMENTARY

• Euro 1.1920

Initial support at 1.1848 (Feb 16 low) followed by 1.1800 (76.4% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.1976 (Feb 20 high) followed by 1.2027 (Feb 10 high).

• Yen 118.60

Initial support is located at 118.24 (Feb 21 low) followed by 117.32 (Feb 17 low). Initial resistance is now at 119.01 (Feb 21 high) followed by 119.41(Feb 3 high).

• Pound – 1.7450

Initial support at 1.7306 (Feb 16 low) followed by 1.7278 (Feb 14 low). Initial resistance is now at 1.7491 (Feb 15 high) followed by 1.7577 (Feb 10 high).

• Aussie – 0.7385

Initial support at 0.7347 (Feb 17 low) followed by 0.7317 (76.4% retracement of the 0.7233 to 0.7577 climb). Initial resistance at 0.7444 (Feb 15 high) followed by 0.7501 (Feb 6 high).