Australian FOREX Daily Outlook 06/12/2006

Currencies lose some ground against the USD. ISM services posts a 6-month high result. Yen strengthens.

CURRENCY TRADING SUMMARY –6 DECEMBER 06 (23:30GMT)

• U.S. Dollar Trading (USD) pegged back lost ground against the majors in general in the overnight foreign exchange trading session as the US non-manufacturing index rose. US ISM services index rose from 57.1 to 58.9 for November compared to an estimate of 56.0. In other markets, the Dow Jones index rose by 47pts and the NASDAQ rose by 3pts as the market reacted positively to the ISM result. Crude oil lifted US11c to US$62.55 a barrel as the market awaits any more news on proposed production cuts by OPEC. Looking ahead, ADP payrolls estimate is due out tonight.

• The Euro (EUR) traded within a low of 1.3287 and a high of 1.3364, before closing at 1.3327 in the New York session. On the data front, PMI services came in higher than expected at 57.6 compared to a 56.5 forecast. Retails sales came in at 0.3% for October as expected. Looking ahead, the ECB interest rate announcement and press conference is due out tomorrow with the market expecting the ECB to hike rates by 25 basis points.

• The Japanese Yen (JPY) traded within a low of 114.43 and a high of 115.43 versus the dollar, before closing at 114.83 in the New York session. Looking ahead, leading/coincident indices are due out today.
• The Sterling (GBP) traded within a low of 1.9677 and a high of 1.9822, before closing at 1.9742 in the New York session. On the data front, PMI services posted a rise to 59.8 from 59.3 and compared to a 58.8 estimate. Looking ahead, industrial production is due out today.

• The Australian Dollar (AUD) traded within a low of 0.7845 and a high of 0.7898, before closing at 0.7866 in the New York session. On the data front, the RBA announced that they would keep interest rates steady at 6.25%. Looking ahead, Aussie GDP is due out today. UPDATE: Aussie GDP came in at 0.3% compared to 0.7% estimate forQ3 and 2.2% compared to 2.0% for the year.
• Gold (XAU) fell by US$1.90 an ounce to US$649.00 an ounce in response to s firmer greenback.

TECHNICAL COMMENTARY

• Euro 1.3315

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 114.85

Initial support is located at 114.43 (Dec 5 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 – 1.9730

Initial support at 1.9635 (Dec 1 high) followed by 1.9434 (Nov 29 reaction low). Initial resistance is now at 1.9849 (Dec 1 high) followed by 1.9912 (1.618 projection of 1.8516-1.9182 from 1.8835).

• Australian Dollar – 0.7860

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 – 642

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).