Australian FOREX Daily Outlook 11/10/2006

US Dollar continues to strengthen against major currencies. Forex market awaits FOMC minutes. Oil drops below US$59 a barrel.

CURRENCY TRADING SUMMARY –11 OCTOBER 06 (01:30GMT)

• U.S. Dollar Trading (USD) was markedly stronger against the majors in the overnight foreign exchange trading session as the market expectation is that the Federal Reserve will not move quickly to cut rates in the coming months. US wholesale inventories rose by 1.1% in August, beating expectations of a 0.7% rise. In other markets, the Dow Jones index rose by 9pts and the NASDAQ climbed 4pts as consumer and transport stocks benefited from the drop in oil. Crude oil dropped sharply by US$1.44 a barrel to US$58.52 as the market waited for more details on proposed OPEC cuts in production. Looking ahead, the FOMC minutes from their September 20^th meeting is due out tonight.
  

• The Euro (EUR) traded within a low of 1.2516 and a high of 1.2612, before closing at 1.2534 in the New York session. There were comments from ECB governing council member Yves Mersch who stated that EZ interest rates were not yet in a neutral range.
  

• The Japanese Yen (JPY) traded within a low of 118.94 and a high of 119.75 versus the dollar, before closing at 119.73 in the New York session. On the data front, private machinery orders came in at 6.7% for the month of August, below the expected 11.2% by the market. There were comments from the PBOC that it expected the USD to gradually decline going forward.
  

• The Sterling (GBP) traded within a low of 1.8531 and a high of 1.8702, before closing at 1.8541 in the New York session. On the data front, UK trade balance for August came in at –GBP$6.73billion from an estimated –GBP$6.3billion.
  

• The Australian Dollar (AUD) traded within a low of 0.7429 and a high of 0.7461, before closing at 0.7438 in the New York session.
  

• Gold (XAU) weakened by US$6.60 to US$576.20 an ounce as a result of unwinding of safe-haven buying in the precious metal.

TECHNICAL COMMENTARY

• Euro 1.2540

Initial support at 1.2517 (Oct 10 low) followed by 1.2456 (Jul 19 reaction low and key support). Initial resistance is now located at 1.2615 (Oct 9 high) followed by 1.271 (Oct 6 high).

• Yen 119.65

Initial support is located at 118.82 (Oct 9 low) followed by 117.32 (Sep 2 low). Initial resistance is now at 119.78 (Oct 10 high) followed by 120.0 (Psychological round number resistance).

• Pound – 1.8545

Initial support at 1.8493 (61.8% retracement of the 1.8090 to 1.9146 advance) followed by 1.8385 (Jul 25 low). Initial resistance is now at 1.8715 (Oct 10 high) followed by 1.888 (Oct 6 high).

• Australian Dollar – 0.7440

Initial support at 0.7414 (Oct 4 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 – 573

Initial support at 560.13 (Oct 4 low) followed by 554.4 (Jun 15 low). Initial resistance is now at 581.1 (Oct 6 high) followed by 598.25 (Oct 3 high).