Australian FOREX Daily Outlook 03/05/2006

MARKET SUMMARY –03MAY06 (05:00GMT)

• The Dollar continued its slide against the major currencies overnight. The market used strong PMI data out of the Europe and UK to sell the US dollar. On the data front in the States, the March Pending Home Sales index fell 1.2% after 0.8% in February. This is consistent to a 5% decline in existing home sales for March, which is a decent pace of deceleration in the housing market. In other markets, US shares were stronger overnight with the Dow Jones index at fresh 6-year highs. The Dow Jones rose by 73pts and the NASDAQ edged up 5pts. Crude oil rose again overnight due to persistent fears about a disruption in oil supplies. Crude rose by US91c to US$74.61 a barrel. Looking ahead and the non-manufacturing ISM is due out later today in the States with the market expecting it to print at 59.5.
  

• The Euro traded in a range of 1.2559 to 1.2668, before closing at 1.2615 in the New York session. PMI’s in Europe best since September 2000,printing 56.7 from 56.1 in March. Germany strong, France steady at solid levels and even Italy picking up a bit.
  

• The Japanese yen traded in a range of 113.09 to 114.03 versus the dollar, before closing at 113.35 in the New York session. Golden Week officially started today in Japan and continues through until the end of the week.
  
• The Sterling rallied from 1.8207 to a high of 1.8428, before closing at 1.8400 in the New York session. PMI data in the UK far better than expectations, growing at its fastest pace in 18 months [54.1 up from 51.0 in March]. Both output and demand jumped and Sterling gained a quick 50 points. Later, UK retail sales also printed strongly and Sterling eventually ran to a new 7 1/2 month high of 1.8428.
  

• The Aussie traded in a range of 0.7551 to 0.7635, before closing at 0.7605 in the New York session. Today in Australia, the RBA raised rates to stem inflation by a quarter of a percentage point to 5.75 percent, saying inflationary dangers warranted a pre-emptive move. The policy tightening, which markets had only seen as a 50/50 bet, was the first in 14 months and left the key cash rate at its highest level since February 2001. Traders responded by lifting the Australian dollar to seven-month highs around of 0.7675 versus the US dollar.
  
• Gold surged to fresh 25-year highs overnight, taking direction from higher oil price and weaker greenback. Gold rose by US$7.20 an ounce to US$667.40.

TECHNICAL COMMENTARY

• Euro 1.2650

Initial support at 1.2520 (Apr 28 low) followed by 1.2403 (Apr 27 low). Initial resistance is now located at 1.2692 (May 1 high) followed by 1.2731 (Former support from Feb 8, 2005).

• Yen 113.20

Initial support is located at 112.33 (May 1 low) followed by 111.54 (50% retracement of the 101.67 to 121.41 advance). Initial resistance is now at 113.86 (May 1 high) followed by 114.49 (Apr 28 corrective high).

• Pound – 1.8420

Initial support at 1.8205 (May 1 low) followed by 1.8000 (Apr 28 low). Initial resistance is now at 1.8501 (Sep 5, 2005 high) followed by 1.8595 (61.8% retracement of the 1.9551 to 1.7048 decline).

• Aussie – 0.7670

Initial support at 0.7535 (Apr 28 low) followed by 0.7492 (Apr 27 low). Initial resistance is now at 0.7760 (76.4% retracement of the 0.7990 to 0.7015 decline) followed by 0.8000 (Psychological level).