Australian FOREX Daily Outlook 03/10/2006

US dollar falls as ISM manufacturing index disappoints and the strong Japanese Tankan survey surprises the forex market.

CURRENCY TRADING SUMMARY –3 OCTOBER06 (01:30GMT)

• U.S. Dollar Trading (USD) weakened against the majors in the overnight foreign exchange trading session as the US ISM manufacturing index disappointed. The ISM index came in at 52.9 for the month of September from a 53.5 estimate and a previous result of 54.5. Construction spending in August climbed to 0.3% from a 0.2% estimate raising hopes the housing market may be stabilising. In other markets, the Dow Jones index fell by 9pts and the NASDAQ gave up 21pts after downgrades and less then expected earnings dominated the markets. Crude oil prices fell by US$1.88 a barrel to US$61.03 as high inventory levels and a mild start to the winter season eased supply concerns amid proposed cuts in production by Nigeria and Venezuela.
  

• The Euro (EUR) traded within a low of 1.2663 and a high of 1.2758, before closing at 1.2737 in the New York session. Looking ahead, Eurozone PPI is due out today.
  

• The Japanese Yen (JPY) traded within a low of 117.54 and a high of 118.40 versus the dollar, before closing at 117.64 in the New York session. On the data front, earlier during the day the September Tankan Survey for large manufacturers rose to 24 from an estimated 21, the highest level since September 2004.
  

• The Sterling (GBP) traded within a low of 1.8678 and a high of 1.8877, before closing at 1.8866 in the New York session. On the data front, manufacturing production came in better than the expected level of 53 at 54.4.
  

• The Australian Dollar (AUD) traded within a low of 0.7425 and a high of 0.7490, before closing at 0.7485 in the New York session. On the data front, Retail sales came in at 0.3% compared to an estimate of o.2%, while building permits came in at -12.6% compared to an estimate of -3%. Looking ahead, RBA decision on interest rates is due tomorrow after their 2-day meeting.
  

• Gold (XAU) fell by US90c to US$593.30 an ounce as oil prices fell and a lack of fund buying caused a sell-off in the precious metal.

TECHNICAL COMMENTARY

• Euro 1.2740

Initial support at 1.2661 (Sep 26 low) followed by 1.263 (Sep 15 reaction low). Initial resistance is now located at 1.2768 (61.8% retracement of the 1.2834 to 1.2661 decline) followed by 1.2834 (Sep 22 reaction high).

• Yen 117.60

Initial support is located at 117.32 (Sep 29 low) followed by 116.89 (Sep 27 low). Initial resistance is now at 118.41 (Oct 2 high) followed by 118.56 (Multi-year key trend line / triangle resistance).

• Pound – 1.8865

Initial support at 1.8633 (Sep 29 low) followed by 1.8601 (Sep 11 low). Initial resistance is now at 1.8878 (Oct 2 high) followed by 1.8919 (Sep 28 high).

• Australian Dollar – 0.7470

Initial support at 0.7432 (Oct 2 low) followed by 0.7405 (Jul 17 low). Initial resistance is now at 0.7495 (Oct 2 high) followed by 0.7557 (Sep 26 high).

• Gold – 595

Initial support at 590.1 (Sep 27 low) followed by 582.49 (Sep 25 low). Initial resistance is now at 607.01 (Sep 28 high) followed by 614.01 (61.8% retracement of the 640.60 to 571.00 decline).