Australian FOREX Daily Outlook 19/04/2006

MARKET SUMMARY –19APRIL06 (05:00GMT)

• The Dollar continued to weaken against the major currencies overnight on the back of dovish comments from FOMC and weaker than expected housing market data. FOMC Minutes show the end of the tightening campaign is “likely to be near”, that members were concerned about the risk of rising too far , and felt that inflation “was not in the process of moving up”. There were 1,960k housing starts in the US in March, down from 2,120k in February and below the expectation of 2,030k. Building permits fell 2,059k from 2,145k, below the expectation of 2,100k. In other data, US producer price inflation (PPI) rose 0.5% in March. The market had expected a rise of 0.4%. Core prices (ex fuel and food) rose by 0.1%, slightly less than the expectation of 0.2%. In other markets, US shares surged overnight following the FOMC minutes which indicated the Fed’s interest rate hiking cycle was close to an end. The Dow Jones index rose by 195pts and the NASDAQ by 45pts. Crude oil continued its rise overnight, up by US95c to US$71.35 a barrel. Looking ahead and US CPI is due out later today in the States. In March, the headline CPI is expected to rise by 0.4% and the core CPI is expected to rise by 0.2%.
  

• The Euro continued to strengthen against the dollar, rallying from a low of 1.2225 to a high of 1.2360, before closing near its highs in the New York session. ECB’s Caruana saying that Eurozone GDP will grow at a faster rate than last year, close to potential … however he is unsure how the oil price rise will affect inflation.
  

• The Japanese yen traded in a range of 117.06 to 118.22 versus the dollar, before closing near its highs in the New York session. Japan‘s Fin Min Tanigaki saying that he hopes that the BOJ will send a message that it won’t raise rates quickly and that recent rises in long-term rates have been a bit rapid.
  

• The Sterling rallied from a low of 1.7679 to a high of 1.7840, before closing near its highs in the New York session.
  
• The Aussie rallied from .7374 to 0.7425 versus the dollar, before closing near its highs in the New York session.

TECHNICAL COMMENTARY

• Euro 1.2355

Initial support at 1.2223 (Apr 18 reaction low) followed by 1.2120 (Apr 17 low). Initial resistance is now located at 1.2412 (38.2% retracement of the 1.3668 to 1.1638) followed by 1.2590 (Sep 2, 2005 high).

• Yen 116.85

Initial support is located at 116.68 (Apr 6 low) followed by 116.25 (Mar 27 low). Initial resistance is now at 118.23 (Apr 18 reaction high) followed by 118.90 (Apr 11 high).

• Pound – 1.7830

Initial support at 1.7679 (Apr 18 reaction low) followed by 1.7522 (Apr 17 low). Initial resistance is now at 1.7860 (Jan 31 reaction high) followed by 1.7937 (Jan 25 high).

• Aussie – 0.7430

Initial support at 0.7270 (Apr 17 low) followed by 0.7237 (Apr 13 low). Initial resistance is now at 0.7488 (Mar 2 reaction high) followed by 0.7502 (13 – month trendline resistance).