Australian FOREX Daily Outlook 05/12/2006

Currencies grind higher against USD in a relatively quiet trading session. Gold tests US$650 an ounce.

CURRENCY TRADING SUMMARY –5 DECEMBER 06 (23:30GMT)

• U.S. Dollar Trading (USD) grinded lower against the majors in the overnight forex trading session as pending home sales fell and Michael Moskow commented on the current state of US inflation. US existing home sales fell by 1.7% in October with the index dropping to 107.2 as the market centered on a result near 108.6. Chicago Federal Reserve President Michael Moskow commented that inflationary expectations have been contained however vigilance must be exercised as inflation risks are still present with the economy still solid. In other markets, the Dow Jones rose by 89pts and the NASDAQ increased by 35pts. Crude oil fell by US$1.08 to US$62.35 a barrel. Looking ahead, non-manufacturing ISM is due out tonight.

• The Euro (EUR) traded within a low of 1.3282 and a high of 1.3370, before closing at 1.3325 in the New York session. On the data front, PPI came in at 0% compared to a 0.1% estimate for October. Looking ahead, PMI services are due out today.

• The Japanese Yen (JPY) traded within a low of 115.10 and a high of 115.84 versus the dollar, before closing at 115.36 in the New York session. Looking ahead, leading/coincident indices are due out tomorrow.

• The Sterling (GBP) traded within a low of 1.9726 and a high of 1.9841, before closing at 1.9797 in the New York session. Looking ahead, industrial production is due out tomorrow.
  

• The Australian Dollar (AUD) traded within a low of 0.7849 and a high of 0.7906, before closing at 0.7899 in the New York session. Looking ahead, the RBA meet for their 2-day meeting on interest rates today. UPDATE: Aussie current account came in at-AUD$12.084bln compared to an -AUD$11bln estimate.
  
• Gold (XAU) rose by US30c to US$650.90 an ounce on the back of a weaker greenback.

TECHNICAL COMMENTARY

• Euro 1.3345

Initial support at 1.3219 (Dec 1 reaction low) followed by 1.3132 (Nov 29 reaction low). Initial resistance is now located at 1.3368 (Dec 4 high) followed by 1.344 (Mar 16, 2005 high).

• Yen 115.35

Initial support is located at 114.97 (Dec 1 low) followed by 113.97 (Aug 4 low). Initial resistance is now at 116.57 (Nov 30 reaction high) followed by 117.12 (Nov 13 high).

• Pound – 1.9805

Initial support at 1.9635 (Dec 1 high) followed by 1.9434 (Nov 29 reaction low). Initial resistance is now at 1.9912 (1.618 projection of 1.8516-1.9182 from 1.8835) followed by 2.0 (Psychological round number).

• Australian Dollar – 0.7885

Initial support at 0.7817 (Nov 29 low) followed by 0.7762 (Nov 27 low). Initial resistance is now at 0.7927 (Dec 1 high) followed by 0.799 (Mar 8, 2005 high).

• Gold – 646

Initial support at 637.74 (Trend line support) followed by 633.0 (Nov 28 low). Initial resistance is now at 650.2 (Dec 1 high) followed by 656.2 (Aug 2 high).