Australian FOREX Daily Outlook 08/12/2006

Currencies lose some ground to the greenback. European Central Bank raises rates. Bank of England keep rates steady.

CURRENCY TRADING SUMMARY –8 DECEMBER 06 (23:30GMT)

• U.S. Dollar Trading (USD) recouped a little more ground against the majors in the overnight foreign exchange trading session as initial jobless claims fell by 32k to 324k in the last week prompting speculation that the labour market is not shrinking as fast as previously thought. The USD received a further boost after the Bank of England kept rates steady and the ECB after raising rates decreased their outlook on interest rates for 2007. In other markets, the Dow Jones index fell 30pts and the NASDAQ gave up 18pts as the market awaits non-farm payrolls. Crude oil dropped US10c to US$62.18 a barrel as traders absorbed expectations of warmer weather in the coming months. Looking ahead, the all important non-farm payrolls are due out tonight together with unemployment from the US and consumer sentiment.
  

• The Euro (EUR) traded within a low of 1.3275 and a high of 1.3324, before closing at 1.3786 in the New York session. On the data front, the ECB announced as expected that they would raise rates from 3.25% to 3.5%. ECB President Jean-Claude Trichet later commented that “the rate of monetary and credit expansion remains rapid, reflecting the low level of interest rates and the strengthening of economic activity in the Euro area.” However, the ECB lowered their 2007 inflation forecast from 2.2% to 2.0%
  

• The Japanese Yen (JPY) traded within a low of 114.76 and a high of 115.39 versus the dollar, before closing at 115.26 in the New York session. Looking ahead, GDP is due out today.
  

• The Sterling (GBP) traded within a low of 1.9615 and a high of 1.9712, before closing at 1.9633 in the New York session. On the data front, the BoE announced as expected that they would keep rates on hold at 5.0%.
  

• The Australian Dollar (AUD) traded within a low of 0.7848 and a high of 0.7909, before closing at 0.7891 in the New York session. On the data front, Aussie unemployment came in at 4.6% beating estimates of 4.8%.
  

• Gold (XAU) rose by US10c to US$636.50 an ounce as technical buying supported the precious metal.

TECHNICAL COMMENTARY

• Euro 1.3280

Initial support at 1.3255 (Dec 6 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 115.30

Initial support is located at 114.43 (Dec 5 low) followed by 113.97 (Aug 4 low). Initial resistance is now at 115.84 (Dec 4 corrective high) followed by 116.57 (Nov 30 high).

• Pound – 1.9625

Initial support at 1.9612 (Dec 7 low) followed by 1.9551 (Former resistance from Dec 16, 2004). Initial resistance is now at 1.9712 (Dec 7 high) followed by 1.9849 (Dec 1 high).

• Australian Dollar – 0.7885

Initial support at 0.7836 (Dec 7 low) followed by 0.7817 (Nov 29 low). Initial resistance is now at 0.7927 (Dec 1 high) followed by 0.799 (Mar 8, 2005 high).

• Gold – 634

Initial support at 625.35 (Dec 7 low) followed by 615.0 (Nov 17 reaction low). Initial resistance is now at 650.2 (Dec 1 high) followed by 656.2 (Aug 2 high).