Australian FOREX Daily Outlook 28/03/2006

MARKET SUMMARY –28MAR06 (05:00GMT)

• The Dollar was mixed versus major currencies overnight in subdued trading, as many investors kept to the sidelines ahead of the Federal Reserve interest rate decision. In other markets, US shares were mixed overnight with the Dow Jones closing down 30pts while the NASDAQ was up 3pts. Crude oil prices were little changed overnight, falling by US10c to US$64.16 a barrel. Looking ahead and the market expect an increase in the funds rate to 4.75%. The main focus will be the statement that accompanies the Fed’s decision. In light of Bernanke’s view that US economic growth will remain solid, the market will be looking for indications that the funds rate will rise further.
  

• The Euro traded in a range of 1.2005 to 12042, before closing at 1.2015 in the New York session. Yesterday in the Eurozone, the French INSEE survey met expectations with the headline index at 105. The prior month’s reading revised up to a 17-month high of 106. Today’s German IFO survey is likely to send a similar message of stability at high levels. The market expectations are centered on 102.8.
  
• The Japanese yen traded in a range of 116.43 to 116.95, before closing at 116.75 in the New York session. The Japanese yen continues to benefit in the last couple of weeks at the expense of high yielding currencies such as AUD and NZD. This despite weaker business sentiment reflected in the MOF/Cabinet Office’s quarterly business survey released yesterday.

• The Sterling traded in a range of 1.7417 to 1.7497, before closing at 1.7460 in the New York session. A British Bankers’ Association report showed that the number of mortgage approvals for home purchases rose in February from a 12-month low the month before, and was up 22% on a year earlier.
  

• The Aussie traded to fresh lows of 0.7036 and then recovered to 0.7080, before closing at 0.7055 in the New York session.
  
• Gold &amp Silver rallied strongly overnight with the latter rising to 22 – year highs. Gold rose by US$6.90 an ounce to US$567.40.

TECHNICAL COMMENTARY

• Euro 1.2010

Initial support at 1.1942 (76.4% retracement of the 1.1859 to 1.2209 advance) followed by 1.1859 (Mar 10 low). Initial resistance is now located at 1.2080 (50% retracement of the 1.2209 to 1.1951 decline) followed by 1.2110 (61.8% retracement of the 1.2209 to 1.1951 decline).

• Yen 117.00

Initial support is located at 116.21 (76.4% retracement of the 115.50 to 118.51 advance) followed by 115.50 (Mar 20 reaction low). Initial resistance is now at 117.67 (Mar 27 reaction high) followed by 118.51 (Mar 24 reaction high).

• Pound – 1.7460

Initial support at 1.7308 (Mar 24 low) followed by 1.7270 (61.8% retracement of the 1.7230 to 1.7597 advance). Initial resistance is now at 1.7509 (Mar 22 high) followed by 1.7563 (Mar 21 high).

• Aussie – 0.7100

Initial support at 0.7036 (Mar 27 low) followed by 0.7000 (Psychological support). Initial resistance at 0.7152 (Mar 24 high) followed by 0.7220 (Mar 21 high).