Australian FOREX Daily Outlook 08/06/2006

MARKET SUMMARY –8JUNE06 (05:00GMT)

• The Dollar strengthened last night on the back of hawkish comments by Atlanta Federal Reserve president Jack Guynn after he stated that he wasn’t going to take risks with inflation, and that it would be harder to reel in inflation if it were to escape from manageable limits. In other markets, the Dow Jones initially lifted in early trade before finishing 71pts lower, while the NASDAQ fell by 11pts. Crude oil fell by US$1.68 to US$70.82 a barrel after former Federal Reserve chairman Alan Greenspan commented that the US had been able to absorb the implicit tax of rising oil prices, however recent data suggests it may be having some impact. Also, a surprise increase in domestic crude oil supply further helped drive down oil prices. Looking ahead, the US trade balance is due out tomorrow.
  

• The Euro traded in a range of 1.2760 to 1.2828, before closing at 1.2785 in the New York session. On the data front, retail sales rose 2.8% in April beating forecasts of 2.3%.
  

• The Japanese yen traded in a range of 113.03 to 113.69 versus the dollar, before closing at 113.57 in the New York session. On the data front, the M2 Money Supply came in at 1.4%, below forecasts of 1.8%.
  

• The Sterling traded in a range of 1.8527 to 1.8647, before closing at 1.8567 in the New York session. Looking ahead, the BoE interest rate announcement is due out today.
  

• The Aussie traded in a range of 0.7393 to 0.7429, before closing at 0.7414 in the New York session. On the data front, unemployment came in at 4.9% beating forecasts of 5.1%.

• Gold fell by US$2.10 to $632.60 an ounce with investment fund activities exaggerating movements.Base metal prices increased as traders sought to buy as a response to tight physical supplies.

TECHNICAL COMMENTARY

• Euro 1.2780

Initial support at 1.2722 (June 1 low) followed by 1.2692 (May 19 low and key short-term support 38.2% retracement of the 1.1951-1.2980 rally). Initial resistance is now located at 1.2935 (June 6 high) followed by 1.298 (June 5 high).

• Yen 113.70

Initial support is located at 112.06 (June 6 low) followed by 111.32 (June 2 low). Initial resistance is now at 113.57 (June 6 high) followed by 114.18 (May 4 high &amp 50% ret 119.41 to 108.98).

• Pound – 1.8545

Initial support at 1.8530 (May 26 low) followed by 1.8474 (June 5 low 38.2% retracement of the 1.7250-1.9027 rally). Initial resistance is now at 1.8889 (May 22 high) followed by 1.8964 (May 19 corrective high).

• Aussie – 0.7415

Initial support at 0.7357 (April 20 low) followed by 0.7313 (61.8% retracement of 0.7015-0.7795 rise). Initial resistance is now at 0.7487 (June 6 high) followed by 0.7547 (June 5 high).