Australian FOREX Daily Outlook 29/12/2006

Dollar weakens ahead of end of year holidays. Comments from Eurozone bolster Euro strength. Commodities up.

CURRENCY TRADING SUMMARY –29 DECEMBER 06 (23:30GMT)

• U.S. Dollar Trading (USD) was weaker against the majors in the overnight foreign exchange trading session with markets winding down for 2006 and the Chicago PMI coming in above expectations together with consumer confidence. The Chicago PMI came in at 52.4 from the previous contraction reflecting number of 49.9, and beating expectations of a 50.5 level. Consumer confidence came in at 109 beating estimates of 102. In other markets, the Dow Jones index fell by 9pts and the NASDAQ climbed 5pts as investors sought profits ahead of the holidays. Crude oil was up US19C to US$60.53 a barrel as worries over Iran and their nuclear ambitions resurfaced.

• The Euro (EUR) traded within a low of 1.3107 and a high of 1.3200, before closing at 1.3150 in the New York session. On the data front, ECB Governing Council member Yves Mersch stated that on historical terms, Eurozone interest rates are low.

• The Japanese Yen (JPY) traded within a low of 118.54 and a high of 119.02 versus the dollar, before closing at 118.93 in the New York session. On the data front, PMI manufacturing came in at a 21-month low of 53.1 from 53.7 previously in November.

• The Sterling (GBP) traded within a low of 1.9559 and a high of 1.9667, before closing at 1.9630 in the New York session.

• The Australian Dollar (AUD) traded within a low of 0.7875 and a high of 0.7916, before closing at 0.7909 in the New York session.

• Gold (XAU) rose by US$6.60 to US$636.90 an ounce as funds bought the precious metal.

TECHNICAL COMMENTARY

• Euro 1.3150

Initial support at 1.3089 (Dec 26 corrective low) followed by 1.3052 (Dec 18 corrective low). Initial resistance is now located at 1.3209 (76.4% retracement of the 1.3246 to 1.3089 decline) followed by 1.3247 (61.8% retracement of the 1.3368 to 1.3052 decline).

• Yen 118.90

Initial support is located at 118.22 (Dec 22 low) followed by 117.44 (Dec 15 low). Initial resistance is now at 119.24 (Dec 26 high) followed by 119.67 (Oct 24 corrective high).

• Pound – 1.9625

Initial support at 1.9516 (Dec 26 corrective low) followed by 1.9434 (Dec 18 corrective low). Initial resistance is now at 1.9751 (Dec 20 corrective high) followed by 1.9849 (Dec 1 trend high).

• Australian Dollar – 0.7905

Initial support at 0.7808 (Dec 27 corrective low) followed by 0.7774 (50% retracement of the 0.7614 to 0.7933 advance). Initial resistance is now at 0.7933 (Dec 8 trend high) followed by 0.799 (Mar 8, 2005 reaction high).

• Gold – 635

Initial support at 618.2 (Dec 21 low) followed by 612.17 (Dec 18 corrective low). Initial resistance is now at 635.85 (Dec 28 high) followed by 638.1 (Dec 8 high).