Australian FOREX Daily Outlook 24/02/2006

MARKET SUMMARY –24FEB06 (05:00GMT)

• The Dollar was down across the board overnight, sparked initially by yen strength in Asia and assisted further by strong German business sentiment data. The dollar managed to pare back some of its losses against the major currencies due to better than expected jobless claims data. Jobless claims declined to 278k against market expectations of a rise to 295k in the week of January 28 following 298k in the previous week. The low level was partly due to the East Coast blizzard, which occurred in the same week. Outgoing Federal Reserve President Santomero stated the US economy’s long-run potential growth rate is about 3.0%, consistent with the Fed keeping monetary policy neutral. Santomero stated “the outlook is for real GDP to moderate a bit further over the course of the year and next, settling at a sustainable 3% annual growth pace”. In other market, US shares were down due to profit taking. The Dow Jones closed down 68pts while the NASDAQ was down 5pts. Crude oil prices fell overnight as rising US stockpiles offset the impact of feared supply disruption in Nigeria. Crude oil fell by US47c to US$60.54 a barrel. Looking ahead and US durable good for January is released later today in the States. Market forecast centre on a 2% rise in headline orders in January after December’s 1.8% increase. Core durables (excluding volatile transportation orders) are expected to rise by 0.7% after a 1.7% lift in December.

• The Euro traded in a range of 1.1899 to 1.1970, before closing at 1.1920 in the New York session. In the Eurozone yesterday, German IFO business climate beat expectations in February. It rose to 103.3, from a downwardly revised 101.8 in January and compared to the consensus of 101.5. The survey is now at its highest level since 1991. The survey results support the view for an ECB hike in March. German GFK consumer confidence was also released, and continued its improvement to 4.8 from 4.6 in February, and the data highlights the favorable outlook for German growth after disappointing Q4 GDP numbers.

• The Japanese yen traded in a volatile range of 116.76 to 117.66 versus the dollar, before closing at 117.15 in the New York session. The Japanese yen started its rise versus the greenback in yesterday’s Asian session following BOJ’s Fukui telling Parliament that the five year old quantitative easing policy would be ending soon.

• The Sterling traded in a range of 1.7415 to 1.7556, before closing at 1.7520 in the New York session. Business investment in Q4 in the UK down 1%, manufacturing sharply lower, with commentators noting that the BoE vote was 8/1 to hold rates steady are suggesting that”the one” might be closest to the truth. However the Sterling traded firm versus the dollar and the key crosses.

• The Aussie recovered from 0.7357 to trade as high as 0.7422, before closing at 0.7390 in the New York session.

• Gold traded lower overnight due to technical trade. Gold fell by US$5.70 to US$550.90 an ounce.

TECHNICAL COMMENTARY

• Euro 1.1925

Initial support at 1.1892 (Feb 23 low) followed by 1.1848 (Feb 16 low). Initial resistance is now located at 1.1976 (Feb 20 high) followed by 1.2027 (Feb 10 high).

• Yen 116.75

Initial support is located at 116.41 (50% retracement of the 113.41 to 119.41 advance) followed by 115.70 (61.8% retracement of the 113.41 to 119.41 advance). Initial resistance is now at 118.54 (Feb 23 high) followed by 119.01(Feb 21 high).

• Pound – 1.7520

Initial support at 1.7414 (Feb 23 low) followed by 1.7375 (Feb 22 low). Initial resistance is now at 1.7577 (Feb 10 high) followed by 1.7643 (Feb 6 high).

• Aussie – 0.7400

Initial support at 0.7317 (Feb 17 low) followed by 0.7233 (Dec 27, 2005 low). Initial resistance at 0.7444 (Feb 15 high) followed by 0.7451 (Jan 19 high).