Australian FOREX Daily Outlook 03/04/2006

MARKET SUMMARY –03APRIL06 (05:00GMT)

• The Dollar made minor gains versus the major currencies in Friday night trade. There was a batch of data released in the States and taken collectively the US data was generally upbeat. US personal income rose by 0.3% in February with spending up by 0.1%. The core personal spending deflator (key inflation measure) rose by 0.1% to stand higher than a year earlier. US factory orders rose by a smaller than expected 0.2% in February. The Chicago purchasing manager’ index rose from 54.9 to 60.4 in March and consumer sentiment rose from 86.7 to 88.9 in March. In other markets, US share markets fell on Friday as a decline in crude oil prices pushed energy stock lower, offsetting the positive influence on the market generated by upbeat economic data. The Dow Jones fell by 41 points while the NASDAQ lost just 1 point. Crude oil prices eased on Friday, after Iran assured investors that it would not use oil as a weapon in its dispute with Western nations over its nuclear ambitions. Crude oil fell by US 55 cents to US$66.60 a barrel. Looking ahead, US ISM manufacturing index is released in the States later today. The index is expected to rise again in March to 57.7 from 56.7 in February.

• The Euro traded down from 1.2151 to a low of 1.2083, before recovering to close at 1.2115 in the New York session. Eurozone flash March inflation was on expectations at 2.2%, down from February’s 2.3% result. Eurozone business conditions hit a 5 year high. Retail Sales in Germany fell twice what had been expected in February (down 0.6%) but January had been very high, and the data not creating pessimism. Italian inflation for March, running at 2.1% …stable, but markets had been looking for a 2% result.
  
• The Japanese yen traded in a range of 117.29 to 118.15 versus the dollar, before closing at 117.80 in the New York session. The Japanese yen lost ground against the dollar in today’s Asian session as the Tankan came in below expectations. The large manufacturing index fell to 20 versus market expectations of 23.

• The Sterling traded down from 1.7478 to a low of 1.7335, before closing at 1.7370 in the New York session. UK Consumer Confidence falls 3 points to -7 in March, the data from the UK continues to look soft and the Sterling struggled for the rest of the night after this data was released.

• The Aussie traded in a range of 0.7108 to 0.7173, before closing near its highs in the New York session. In Australia today, the trade deficit narrowed sharply to a surprisingly small $A 595 million in February, as exports jumped 10 percent while imports retreated.The deficit was the smallest since July 2002 and suggested there was a chance trade might not have been a drag on economic growth in the first quarter, after 17 straight quarters of subtracting from growth.
  
• Gold succumbed to profit taking on Friday night and fell by US$5.10 an ounce to US$ 586.70 an ounce.

TECHNICAL COMMENTARY

• Euro 1.2070

Initial support at 1.2020 (Mar 30 low) followed by 1.1979 (Mar 29 corrective low). Initial resistance is now located at 1.2209 (Mar 17 reaction high) followed by 1.2324 (Jan 25 reaction high).

• Yen 118.20

Initial support is located at 116.25 (March 28 low) followed by 115.50 (Mar 20 reaction low). Initial resistance is now at 118.51 (Mar 24 reaction high) followed by 119.21 (Mar 13 high).

• Pound – 1.7330

Initial support at 1.7308 (Mar 24 reaction low) followed by 1.7230 (Mar 10 reaction low). Initial resistance is now at 1.7539 (Mar 28 corrective high) followed by 1.7626 (Mar 6 key reaction high).

• Aussie – 0.7165

Initial support at 0.7058 (Mar 30 low) followed by 0.7015 (Mar 29 corrective low). Initial resistance at 0.7215 (Mar 28 reaction high) followed by 0.7235 (38.2% retracement of the 0.7590 to 0.7015 decline).