Australian FOREX Daily Outlook 27/10/2006

Headline US durable goods data stronger than expected, housing data mixed. Commodity markets volatile. Focus on Japanese CPI.

CURRENCY TRADING SUMMARY –27 OCTOBER 06 (01:30GMT)

• U.S. Dollar Trading (USD) weakened against the majors in the overnight forex trading session as US durable goods and US new home sales surprised on the upside. Durable goods orders rose to 7.8% from an expected 1.9%, however the result was mostly driven by a surge in civilian aircraft and parts orders. New home sales rose to 1.075mln from an expected rise to 1.045mln however, the median price of new homes dropped by 9.7%. Further adding to US weakness were comments made from the Federal Reserve stating that some private and official investors were shifting from USD to Euro. In other markets, the Dow Jones index rose by 29pts while the NASDAQ climbed 7pts. Crude oil dropped US$1.06 a barrel to US$60.34 as profit taking entered the market. Looking ahead, US GDP and PMI manufacturing are due out tonight.
  

• The Euro (EUR) traded within a low of 1.2599 and a high of 1.2703, before closing at 1.2691 in the New York session. The ECB President Jean-Claude Trichet said inflation risks in 2007 remained on the upside, and the ECB should remain vigilant to ensure low inflation.
  

• The Japanese Yen (JPY) traded within a low of 118.29 and a high of 119.16 versus the dollar, before closing at 118.38 in the New York session. On the data front, Japanese CPI came in as expected except monthly nationwide CPI which came in at 0.2% compared to 0.3% estimate. Japanese retail sales disappointed coming in at 0.8% for September year on year, compared to 1.3% previously.
  

• The Sterling (GBP) traded within a low of 1.8781 and a high of 1.8925, before closing at 1.8906 in the New York session.
  

• The Australian Dollar (AUD) traded within a low of 0.7609 and a high of 0.7644, before closing at 0.7643 in the New York session.
  

• Gold (XAU) rose by US$9.00 to US$599.80 an ounce taking advantage of a weaker US dollar. In the base metal market, zinc has continued its record run as global supplies fall to 10 year lows, approximately 3-days worth.

TECHNICAL COMMENTARY

• Euro 1.2695

Initial support at 1.2597 (Oct 26 low) followed by 1.2524 (Oct 24 low). Initial resistance is now located at 1.2704 (Oct 26 high) followed by 1.2769 (Oct 3).

• Yen 118.60

Initial support is located at 118.26 (Oct 26 low) followed by 118.04 (Oct 19 low). Initial resistance is now at 119.67 (Oct 24 high) followed by 119.9 (Oct 13 trend high).

• Pound – 1.8900

Initial support at 1.8768 (Oct 26 low) followed by 1.8663 (Oct 18 low). Initial resistance is now at 1.8928 (Oct 26 high) followed by 1.9076 (Sep 25 high).

• Australian Dollar – 0.7635

Initial support at 0.7559 (Oct 24 low) followed by 0.7522 (Oct 18 low). Initial resistance is now at 0.7649 (76.4% retracement of the 0.7722 to 0.7414 decline) followed by 0.7683 (Sep 7 high).

• Gold – 595

Initial support at 590.45 (Oct 26 low) followed by 580.05 (Oct 25 low). Initial resistance is now at 598.82 (Oct 26 high) followed by 602.6 (Oct 20 high).