Australian FOREX Daily Outlook 09/03/2006

MARKET SUMMARY –09MAR06 (05:00GMT)

• The Dollar was range bound overnight as the market awaits a policy decision by the Bank of Japan later today and the US payroll s report on Friday. There were no major data releases in the States overnight. St Louis Federal Reserve President William Poole indicated that the coming slowdown in house prices did not pose a significant risk to the US consumer spending and the overall growth outlook. In his second speech in his new role, Federal Reserve Chairman Bernanke didn’t mention economic matters in his speech. In other markets, US shares were subdued and ended the day mixed. The Dow Jones index closed up 25pts while the NASDAQ was flat. Crude oil prices continued its decline overnight, in response to a larger than expected rise in weekly US oil inventories. In addition, OPEC oil ministers also kept the output target unchanged at 28 million barrels a day. Crude oil fell by US$1.56 to US$60.02 a barrel after hitting US$59.25 at one point. Looking ahead, the US trade balance for January will be released later in the States today. The market is expecting the trade deficit to widen further to 66.5 billion.

• The Euro traded in a range of 1.1893 to 1.1941, before closing at 1.1925 in the New York session. There were no major data releases in the Eurozone overnight. European shares continued lower as the dropped to a 3 week low in the major centres. Euro bond yields also rose slightly. Markets are concerned about the future intentions of the ECB to continue to raise rates and this is being reflected in rising bond yields, which tends to make shares less attractive.

• The Japanese yen traded in a range of 117.52 to 118.04 versus the dollar, before closing at 117.85 in the New York session. The market is waiting for the BOJ decision on monetary policy later today.

• The Sterling traded in a range of 1.7344 to 1.7419, before closing at 1.7385 in the New York session. Yesterday in the UK, consumer sentiment hit a three year low according to the CBI release overnight but HBOS house price inflation in the UK was higher than expected at 5.5% y/y.

• The Aussie traded in a range of 0.7316 to 0.7362, before closing at 0.7345 in the New York session. In Australia today, employment rebounded by a surprisingly strong 25,900 in February, way above analysts expectations for a 10,000 gain. The unemployment rate ticked down to 5.2 % from 5.3 %.

• Gold prices slumped to three week lows overnight, pressured by continued selling from fund managers. Gold fell by over US$10 an ounce to US$544.60 an ounce.

TECHNICAL COMMENTARY

• Euro 1.1945

Initial support at 1.1868 (Mar 7 low) followed by 1.1825 (Feb 27 low). Initial resistance is now located at 1.2022 (Mar 7 high) followed by 1.2094 (Mar 6 high).

• Yen 117.70

Initial support is located at 117.32 (March 8 low) followed by 116.04 (March 6 low). Initial resistance is now at 118.54 (Feb 23 high &amp approx 76.4% retracement of 119.41 to 115.45 decline) followed by 119.01 (Feb 21 high).

• Pound – 1.7370

Initial support at 1.7329 (Mar 7 low) followed by 1.7278 (Feb 14 low). Initial resistance is now at 1.7420 (Mar 8 high) followed by 1.7509 (Mar 7 high).

• Aussie – 0.7335

Initial support at 0.7316 (76.4% retracement of the 0.7233 to 0.7590 advance) followed by 0.7233 (Dec 27, 2005 low). Initial resistance at 0.7407 (Mar 7 high) followed by 0.7488 (Mar 2 high).