Australian FOREX Daily Outlook 18/05/2006

MARKET SUMMARY –18MAY06 (05:00GMT)

• The Dollar soared against major currencies on Wednesday with the market expecting the Federal Reserve to raise rates again after higher than expected CPI figures came through. Also, comments from the French Finance Minister indicating that all will be done to stop the Euro appreciating, spurred further strength in the US dollar. On the data front, US consumer prices rose by 0.6% in April, ahead of expectation which was a rise of only 0.5%. Core prices rose by 0.3% above the 0.2% expected by analysts. In other markets, US stocks fell as a result of the higher than expected April CPI data fuelling fears that the higher inflation will cause an increase in interest rates. The Dow Jones index fell by 214pts, whilst the NASDAQ fell by 33pts. Crude oil prices retreated from yesterday’s close falling 84c to US$68.69 a barrel.
  

• The Euro traded in a range of 1.2701 to 1.2922 before closing at 1.2743 during the New York session. On the data front, The Eurozone CPI rose 0.7% in April, resulting in a jump in the annual inflation rate to 2.4% from 2.2%. The annual core CPI also jumped from 1.3% to 1.5%.
  

• The Japanese yen traded in a range of 108.37 to 111.35 versus the dollar, before closing at 110.97 in the New York session. On the data front, the Q1 GDP figures are due out tomorrow.
  
• The Sterling traded in a range of 1.8776 to 1.9026, before closing at 1.8792 in the New York session. On the data front, the unemployment rate is now at 5.2% from 5.1% previously. The BoE minutes to the May meeting showed one member voting for a cut in interest rates, one for a hike, and the remaining 6 voting for no change. The market had expected a 7-1 vote, with the later vote in favour of a cut in rates. Retail sales numbers are due out later today.
  

• The Aussie traded in a range of 0.7575 to 0.7726, before closing at 0.7576 in the New York session. On the data front, the Australian wage price index March qtr showed a rise of 0.9%, down from 1% in Q4 2005 causing the annual rate to fall back to 4.0% from 4.1%.
  

• Gold lost some ground falling US$1.10 to US$691.8.

Initial support at 0.7594 (May 15 low) followed by 0.7551 (May 2 corrective low). Initial resistance is now at 0.7729 (May 17 high) followed by 0.7749 (May 15 high).