Australian FOREX Daily Outlook 02/08/2006

CURRENCY TRADING SUMMARY –2 AUGUST06 (05:00GMT)

• U.S. Dollar Trading (USD) weakened against the majors in the overnight forex trading session as the US ISM manufacturing index came in higher than expected and the Core PCE deflator came in on expectations. US ISM rose to 54.7 from 53.8 in July, beating estimates of a slight pullback to 53.7. US Core PCE deflator came in at 0.2% for the month on June from a previous result of 0.4% in May. Treasury Secretary Henry Paulson also spoke publicly for the first time stating his view that a strong dollar policy is in the interest of the nation. In other markets, the Dow Jones index fell by 60pts and the NASDAQ gave up 29pts as poor earnings results and inflationary fears weighed heavily on the markets. Crude oil rose by US45c to US$74.85 a barrel. Looking ahead, ADP employment figures are due out today.
  

• The Euro (EUR) traded within a low of 1.2722 and a high of 1.2819, before closing at 1.2817 in the New York session. On the data front, unemployment for the Eurozone came in better than expected, dropping to 7.8% from an expected 7.9%. Looking ahead, PPI figures are due out today.
  

• The Japanese Yen (JPY) traded within a low of 114.51 and a high of 115.37 versus the dollar, before closing at 114.57 in the New York session.
  

• The Sterling (GBP) traded within a low of 1.8630 and a high of 1.8762, before closing at 1.8759 in the New York session. Looking ahead, the Bank of England meet today to discuss interest rates with an announcement due tomorrow.
  

• The Australian Dollar (AUD) traded within a low of 0.7615 and a high of 0.7662, before closing at 0.7650 in the New York session. On the data front, the RBA increased interest rates by 25bp to 6.00%.

• Gold (XAU) rose by US$12.00 to US$648.80 an ounce underpinned by a weaker USD and higher oil prices.

TECHNICAL COMMENTARY

• Euro 1.2820

Initial support at 1.272 (Aug 1 reaction low) followed by 1.2659 (Jul 28 reaction low). Initial resistance is now located at 1.2822 (Aug 1 high) followed by 1.2865 (Jul 7 reaction high).

• Yen 114.60

Initial support is located at 114.17 (Jul 31 low) followed by 113.45 (Jul 10 low and 50% ret 108.98 to 117.89). Initial resistance is now at 115.38 (Aug 1 high) followed by 116.04 (Jul 28 high).

• Pound – 1.8755

Initial support at 1.8626 (Aug 1 reaction low) followed by 1.8542 (Jul 27 reaction 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 – 0.7650

Initial support at 0.7593 (Jul 28 low) followed by 0.7518 (Jul 25 corrective low). Initial resistance is now at 0.7677 (July 28 high) followed by 0.7727 (May 17 corrective high).

• Gold – 647

Initial support at 623.75 (Jul 27 low) followed by 602.66 (Jul 24 reaction low). Initial resistance is now at 648.55 (Aug 1 high) followed by 658.96 (76.4% retracement of the 676.35 to 602.66 decline).