Australian FOREX Daily Outlook 06/04/2006

MARKET SUMMARY –06APRIL06 (05:00GMT)

• The Dollar continued to slide against the Euro and commodity currencies overnight on expectations that US official interest rates were near their peak. The market largely ignored positive data with the US ISM services gauge rising from 60.1 to 60.5 in March, contrary to market expectations centered on a fall to 59.0. The market paid more attention to comments made by Kansas City Federal Reserve President Thomas Hoenig who said future monetary policy moves were more difficult, given that interest rates were in the “neutral range”. In other markets US shares traded higher with the Dow Jones up 35pts while the NASDAQ traded to fresh 5yr highs, up by 14pts. Crude oil trader lower overnight as traders focused on a drop in gasoline supplies. Crude oil rose by US84c to US$67.07 a barrel. Looking ahead and Treasury Secretary Snow testifies again to a Senate Appropriations committee while Fed President Moscow will also speak later in the day. On the data front, weekly jobless claims are due with the market expecting little change from the week prior.
  

• The Euro continued to impress as it rallied from 1.2255 to fresh 10 week highs of 1.2306, before closing at 1.2285 in the New York session. On the data front, Services PMI’s throughout Europe were strong. The EU index was at 58.3, with services jobs being created at the fastest pace in five years.Analysts suggest the results virtually guarantee a hawkish tone from the ECB on Thursday night. Italy highest since Nov 03, France since Dec 2000, whereas Germany still robust but slightly softer than a month previously.
  
• The Japanese yen traded in a range of 116.68 to 117.68 versus the dollar, before closing at 117.45 in the New York session.
  

• The Sterling rallied initially to a high of 1.7618 but then drooped to a low of 1.7480, before closing at 1.7540 in the New York session. Sterling suffered from more disappointing data with the UK CIPS services PMI falling to 57.4 from 58.9, while manufacturing production for February unexpectedly was reported to have declined by 0.2% on the month.
  
• The Aussie continued to rally from a low of 0.7222 to a high of 0.7292, before closing at 0.7275 in the New York session. Today in Australia, employment rose a surprisingly strong 27,000 in March, pushing the jobless rate back to 29-year lows and increasing the risk that interest rates will have to be raised to restrain inflation. All the gain in jobs came in part-time employment, which may have been boosted by the Commonwealth Games, while full-time jobs fell 12,400, softening the tone of the report just a little.

TECHNICAL COMMENTARY

• Euro 1.2285

Initial support at 1.2209 (Mar 17 high) followed by 1.2119 (Apr 4 low). Initial resistance is now located at 1.2305 (Apr 5 high) followed by 1.2324 (Jan 25 high).

• Yen 117.50

Initial support is located at 116.68 (Apr 5 low) followed by 116.25 (Mar 28 low). Initial resistance is now at 117.96 (Apr 4 high) followed by 118.82 (Apr 3 high).

• Pound – 1.7530

Initial support at 1.7479 (Apr 5 low) followed by 1.7369 (Apr 4 low). Initial resistance is now at 1.7626 (Mar 6 high) followed by 1.7667 (61.8% retracement of the 1.7937 to 1.7230 decline).

• Aussie – 0.7290

Initial support at 0.7196 (Apr 5 low) followed by 0.7114 (Apr 4 low). Initial resistance is now at 0.7303 (38.2% of 0.7590 – 0.7015 decline.) followed by 0.7370 (61.8% retracement of the 0.7590 to 0.7015 decline).