Australian FOREX Daily Outlook 21/03/2006

MARKET SUMMARY –21MAR06 (05:00GMT)

• The Dollar was mixed against the major currencies overnight. The market preferred to wait for direction from Federal Reserve chairman Ben Bernanke’s speech on monetary policy. On the data front, the Conference Board released their US leading index overnight. The index fell by 0.2% in February, the first decline in five months. Economists had expected the index to decline 0.3% after the originally reported 1.1% gain in January. In other markets, US shares were little changed. The Dow Jones closed down 5pts while the NASDAQ was up 7pts. Crude oil prices fell by US$2.35 a barrel to US$60.42 a barrel.Bernanke comments were generally balanced in his speech, with the dollar a little firmer against the majors. Looking ahead and US PPI is released later today in the States. The US PPI is expected to decrease by 0.2% in February. The monthly core PPI is forecast to rise by 0.2% after a 0.4% rise in January.
  

• The Euro traded in a range of 1.2150 to 1.2197, before closing at 1.2165 in the New York session. German PPI was up 0.7% on the month, much higher than expected, andat plus 5.9%the strongest year on year rise since June 1982. There were more hawkish comments out of the ECB overnight. According to Reuters, ECB President Trichet told French television station LCI that inflation was running above the central’s bank’s target and the ECB would not hesitate to counter price risks, reinforcing market expectations of more ECB rate hikes ahead.

• The Japanese yen traded in a range of 115.50 to 116.45, before closing at 116.35 in the New York session. BoJ’s Mizuno made comments in Chicago overnight saying the Japanese economy is in steady recovery mode and that the uptrend in core CPI is “here to stay”. He expects Japanese overnight rates to remain close to 0% and that an early rate rise could have powerful adverse effects on Japanese economy. Then says there is possibility of economy pausing, or worse, in second half of 2006 sees little chance of recovery and momentum will last through 2007- hardly a ringing endorsement for the economy.

• The Sterling traded in a range of 1.7525 to 1.7588, before closing at 1.7560 in the New York session. The Rightmove house price survey out yesterday showed house prices rising by 0.9% in March, less firm than February but keeping the y/y rate moving higher for the 3^rd month in a row.
  
• The Aussie continued to trade lower from 0.7227 to 0.7178 (17 month low), before closing at 0.7210 in the New York session.

TECHNICAL COMMENTARY

• Euro 1.2140

Initial support at 1.2033 (Mar 16 reaction low) followed by 1.2005 (Mar 14 reaction low). Initial resistance is now located at 1.2209 (Mar 17 high) followed by 1.2324 (Jan 25 high).

• Yen 116.60

Initial support is located at 115.59 (Mar 17 low) followed by 115.45 (Feb 28 low). Initial resistance is now at 117.00 (Mar 17 high) followed by 117.90 (Mar 16 reaction high).

• Pound – 1.7530

Initial support at 1.7512 (Mar 13 low) followed by 1.7416 (Mar 15 low). Initial resistance is now at 1.7626 (Mar 6 high) followed by 1.7667 (61.8% retracement of 1.7937 to 1.7230).

• Aussie – 0.7205

Initial support at 0.7060 (76.4% retracement of the 0.6773 to 0.7990 advance) followed by 0.7000 (Psychological support). Initial resistance at 0.7285 (Mar 20 high) followed by 0.7413 (Mar 15 high).