Australian FOREX Daily Outlook 31/07/2006

CURRENCY TRADING SUMMARY –31JULY06 (05:00GMT)

• U.S. Dollar Trading (USD) slid against the majors in the overnight forex session as data released showed a lower-than-expected US economic growth for the second quarter. US GDP came in at a 2.5% annual rate for Q2 compared to a 3% estimate by the market. The key inflation measure, the PCE deflator, came in at 2.9% which represented a rise of 0.8% from 2.1% previously. The consumer sentiment was little changed, falling to 84.7 from 84.9. In other markets, the Dow Jones index rose by 119pts and the NASDAQ climbed 40pts as the markets are expecting the Federal Reserve to leave rates where they are in response to the weak GDP data released. Crude oil fell by US$1.30 to US$73.24 a barrel as expectations rise of a cease-fire in the Israeli-Lebanese conflict. Looking ahead, the Chicago PMI is due out today.
  

• The Euro (EUR) traded within a low of 1.2663 and a high of 1.2768, before closing at 1.2759 in the New York session. Looking ahead, Eurozone CPI and confidence indicators are due out today.
  

• The Japanese Yen (JPY) traded within a low of 114.64 and a high of 115.97 versus the dollar, before closing at 114.65 in the New York session. On the data front, PMI manufacturing came in at 55.7 compared to a previous month result of 54.3. Industrial production impressed, coming in at 1.9% compared to 1.3% for June.
  

• The Sterling (GBP) traded within a low of 1.8548 and a high of 1.8665, before closing at 1.8640 in the New York session.
  

• The Australian Dollar (AUD) traded within a low of 0.7595 and a high of 0.7685, before closing at 0.7676 in the New York session.
  
• Gold (XAU) rose by US$2.30 to US$634.80 an ounce backed by instability in the Middle East and the weaker US dollar.

TECHNICAL COMMENTARY

• Euro 1.2680

Initial support at 1.2651 (38.2% of the 1.2456-1.2772 advance) followed by 1.2577 (61.8% retracement of the 1.2456 to 1.2772 advance). Initial resistance is now located at 1.2772 (Jul 27 high) followed by 1.2781 (Jul 12 reaction high).

• Yen 116.00

Initial support is located at 114.5 (76.4% retracement of the 113.45 to 117.89 advance) followed by 113.45 (Jul 10 low and 50% ret 108.98 to 117.89). Initial resistance is now at 116.04 (Jul 28 high) followed by 116.43 (Jul 27 high).

• Pound – 1.8550

Initial support at 1.8527 (Jul 27 low) followed by 1.8385 (Jul 25 corrective low). Initial resistance is now at 1.8774 (Jun 6 high) followed by 1.8806 (76.4% retracement of the 1.9027 to 1.8090 decline).

• Australian Dollar – 0.7620

Initial support at 0.7593 (Jul 28 low) followed by 0.7518 (Jul 25 corrective low). Initial resistance is now at 0.7676 (July 28 high) followed by 0.7727 (May 17 corrective high).

• Gold – 636

Initial support at 623.75 (Jul 27 low) followed by 602.66 (Jul 24 reaction low). Initial resistance is now at 641.0 (Jul 27 high) followed by 648.2 (76.4% retracement of the 676.35 to 602.66 decline).