Australian FOREX Daily Outlook 07/03/2006

MARKET SUMMARY –07MAR06 (05:00GMT)

• The Dollar strengthened against the major currencies overnight due to higher US bond yields. US treasuries fell (yields higher) as investors expect the Federal Reserve to lift rates again at its next meeting on March 27 &amp 28. This is despite US factory orders falling by 4.5% in January, the largest drop since July 2000, but short of expectations centered on a 5.3% decline. The Pending homes sales index fell by 1.1% in January to stand 4.8% lower than a year ago. In other markets, US shares fell overnight, pressured by higher bond yields and a sharp fall in oil prices. The Dow Jones was down by 63pts while the NASDAQ was down 17pts. Crude oil prices fell by 2.0% as OPEC is set to keep production quotas unchanged at today’s meeting. Crude oil fell by US$1.26 to US$62.41 a barrel.

• The Euro traded down from 1.2082 to as low as 1.1991, before closing at 1.2015 in the New York session. The Eurozone retail sales figure was 0.8% mom for January and slightly higher, 0.9%pa, in annual terms. The strength of the current upswing in Germany and France indicates that Eurozone sales growth should move towards the 2%pa area over the next 6 months.

• The Japanese yen traded in a range of 116.82 to 117.69 versus the dollar, before closing at 117.60 in the New York session.

• The Sterling traded in a range of 1.7467 to 1.7625, before closing at 1.7505 in the New York session.

• The Aussie traded down from 0.7461 to as low as 0.7395, before closing at 0.7405 in the New York session. The Aussie was dragged lower by a stronger dollar across the board and falling commodity prices.

• Gold settled at US$555.50 after a volatile session. The yellow metal was down over $US10 amid technical selling, with additional pressure seen from weaker oil prices and the firmer dollar.

TECHNICAL COMMENTARY

• Euro 1.1990

Initial support at 1.1976 (Feb 20 high) followed by 1.1889 (Mar 1 low). Initial resistance is now located at 1.2094 (Mar 6 high) followed by 1.2133 (61.8% retracement of the 1.2324 to 1.1825 decline).

• Yen 117.50

Initial support is located at 116.04 (Mar 6 low) followed by 115.45 (Mar 1 low). Initial resistance is now at 117.90 (61.8% retracement of the 119.41 to 115.45 decline) followed by 118.54(Feb 23 high).

• Pound – 1.7470

Initial support at 1.7433 (Mar 2 low) followed by 1.7373 (Feb 28 low). Initial resistance is now at 1.7626 (Mar 6 high) followed by 1.7685 (61.8% retracement of the 1.7937 to 1.7278 decline).

• Aussie – 0.7390

Initial support at 0.7343 (Feb 22 low) followed by 0.7317 (Feb 17 low). Initial resistance at 0.7488 (Mar 2 high) followed by 0.7590 (Jan 31 high).