Australian FOREX Daily Outlook 07/04/2006

MARKET SUMMARY –07APRIL06 (05:00GMT)

• The Dollar was largely unchanged against the major currencies with the exception of Euro where it strengthened after ECB President Trichet cooled investors’ expectation for a May rate hike. On the data front, US initial jobless claims unexpectedly fell 5,000 last week to 299,000. The fall reinforces the continued strength in the US labour market. On the speech front, Fed’s Moskow sees US economic prospects as good, latest data as “quite positive” and core inflation contained, but wants to be very careful that inflation expectations do not increase and believes pressure on resources could increase if housing remains solid. In other markets, US shares were mixed overnight with the Dow Jones falling 23pts while the NASDAQ was up 1 point. Crude oil rose by US87c to US$ 67.94 a barrel. Looking ahead and the much anticipated non-farm payrolls report will be released later today in the States. The markets are generally bullish following the low rate of initial jobless claims. Expectations are centered around 190k in March with the unemployment rate expected to remain at 4.7%
  

• The Euro fell from a high of 1.2335 to as low as 1.2196, before closing at 1.2230 in the New York session. The fall occurred after ECB President Trichet surprised the markets by dismissing a May rate hike and refusing to commit to one in June. Trichet said that he did not share the same view as the market, which had been pricing in a rate hike in May, and pointed out that there would be a wealth of new data by June for the central bank to digest.

• The Japanese yen traded in a range of 117.26 to 117.99 versus the dollar, before closing at 117.75 in the New York session.
  

• The Sterling traded in a range of 1.7498 to 1.7597 versus the dollar, before closing at 1.7515 in the New York session. On the data front, Halifax saying UK House Prices rose 0.9% in March, or 6% annualized on the experience of the quarter. Relevant just ahead of the BoE meeting with any trimming of rates likely to stimulate house prices further. The BoE left its key rate unchanged at 4.5% as expected.
  

• The Aussie traded in a range of 0.7274 to a high of 0.7331, before closing at 0.7300 in the New York session.

• Gold prices touched US$600 an ounce overnight for the first time in 25 years. The rise followed inflation concerns building over the rising oil price. Gold rose by US$7.20 an ounce to US$599.70.

TECHNICAL COMMENTARY

• Euro 1.2200

Initial support at 1.2119 (Apr 4 low) followed by 1.2031 (Apr 3 reaction low). Initial resistance is now located at 1.2335 (Apr 6 high) followed by 1.2412 (38.2% retracement of the 1.3663 to 1.1638 decline).

• Yen 117.75

Initial support is located at 117.26 (Apr 6 low) followed by 116.68 (Apr 5 low). Initial resistance is now at 117.99 (Apr 6 high) followed by 118.82 (Apr 3 high).

• Pound – 1.7510

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 – 0.7300

Initial support at 0.7260 (Apr 6 low) followed by 0.7196 (Apr 5 low). Initial resistance is now at 0.7331 (Apr 6 high) followed by 0.7370 (61.8% retracement of the 0.7590 to 0.7015 decline).