Australian FOREX Weekly Outlook 24/10/2006

24/10/06

last week’s currency trading review

The Dollar traded lower versus the major currencies as the market viewed that softer than expected data releases all but ruled out another Fed rate hike this year. The New York Fed survey started the week on a positive note for the US as it came in above market expectations. However, the data that followed was all negative for the dollar with US PPI, CPI and Philly Fed survey all disappointing. The Euro benefited from the weak dollar and a 1.5% increase in the core Eurozone CPI rate. The Euro closed last week at 1.2625 having started the week at 1.2509. The Japanese yen was also stronger versus the dollar as the Russian central bank signaled its intention of adding to its Yen reserves. A newspaper report that suggested the BoJ would look at monitoring carry trades also had positive implications for the Yen. USD/JPY closed last week at 118.66 having started the week at 119.64. The Sterling outperformed all other currencies last week due to strong September inflation data combined with above expectation UK GDP. These data releases suggest that the BoE may be forced to raise interest rates again. The Sterling closed last week at 1.8834 having started the week at 1.8560. The Aussie closed last week at 0.7601 having started the week at 0.7512.

The forex trading week preview

In the States the key focus this week will be on the FOMC meeting (Wednesday). The Fed is likely to keep interest rates unchanged but the accompanying statement could prove critical for the dollar. Housing data in the form of existing home sales (Wednesday) and new home sales (Thursday) will also be watched closely to see if the slowdown in activity has continued. US GDP (Friday) is expected to show a continued slowing in the economy. Durable goods (Thursday) and the final Michigan sentiment survey (Friday) are the other releases of note. We will provide our previews of these data releases in the daily summary.

In the Eurozone the main release will be the German IFO (Wednesday) which is expected to be steady. Business confidence surveys are released in Germany (Friday) with France (INSEE) and Italy (both Wednesday) out earlier in the week. The other key release worth mentioning will be Eurozone M3 money supply (Friday). In the UK it’s a quiet week ahead with CBI Industrial Trends survey the only release of note scheduled for Tuesday. We will provide our previews and reviews of these data releases in the daily summary.

In Japan analysts expect tame numbers from CPI numbers (Friday) for September. We will provide our previews and reviews of these data releases in the daily summary.

Key Weekly Pivot levels

• Euro 1.2545

Initial support at 1.2527 (Oct 19 low) followed by 1.2483 (Oct 16 low). Initial resistance is now located at 1.2644 (Oct 19 high) followed by 1.27 (61.8% retracement of the 1.2834 to 1.2483 decline).

• Yen 119.35

Initial support is located at 118.56 (Oct 23 low) followed by 118.04 (Oct 19 low). Initial resistance is now at 119.9 (Oct 13 trend high) followed by 120.0 (Psychological round number resistance).

• Pound – 1.8725

Initial support at 1.8663 (Oct 18 low) followed by 1.8649 (61.8% retracement of the 1.8516 to 1.8863 advance). Initial resistance is now at 1.8863 (Oct 20 high) followed by 1.8904 (Oct 3 high).

• Australian Dollar – 0.7570

Initial support at 0.7524 (Oct 17 low) followed by 0.7489 (Oct 13 low). Initial resistance is now at 0.7617 (Oct 23 high) followed by 0.7649 (76.4% retracement of the 0.7722 to 0.7414 decline).

• Gold – 582

Initial support at 586.1 (Oct 17 low) followed by 577.4 (Oct 13 low). Initial resistance is now at 602.6 (Oct 20 high) followed by 607.01 (Sep 28 high)