Australian FOREX Daily Outlook 07/07/2006

CURRENCY TRADING SUMMARY –7JULY06 (05:00GMT)

• U.S. Dollar Trading (USD) fell against the major currencies in the overnight session as a weaker ISM survey coupled with hawkish comments from the ECB President helped to pull the dollar down in the forex markets. The US non-manufacturing ISM survey fell to 57.0 in June from 60.1 in May with the market expecting a modest fall to 59.0. After announcing that rates would be kept at current levels, ECB President Trichet commented that he will exercise strong vigilance to keep inflation in check. In other markets, The Dow Jones index gained 73pts while the NASDAQ rose by 2pts. Crude oil fell by US$0.05c to US$75.14 remaining near record highs even in the face of higher inventories from the US. Looking ahead, the all important non-farm payrolls are due out today as well as the unemployment rate.
  

• The Euro (EUR) traded in a range of 1.2724 to 1.2782, before closing at 1.2781 in the New York session. On the data front, the ECB kept interest rates steady at 2.75%
  

• The Japanese Yen (JPY) traded in a range of 114.93 to 115.68 versus the dollar, before closing at 115.11 in the New York session. On the data front, leading indicators came out as expected, reaching the 75 level from previous month’s result of 54.5.
  

• The Sterling (GBP) traded in a range of 1.8337 to 1.8408, before closing at 1.8373 in the New York session. On the data front, the Bank of England announced their decision to keep interest rates steady at 4.5%.
  

• The Australian Dollar (AUD) traded in a range of 0.7415 to 0.7466, before closing at 0.7466 in the New York session.
  
• Gold (XAU) rose by US$6.60 to US$636.30 an ounce with strong buying by funds. Base metals also rose sharply with nickel hitting an all time high.

TECHNICAL COMMENTARY

• Euro 1.2775

Initial support at 1.2702 (38.2% retracement) followed by 1.2655 (June 30 low). Initial resistance is now located at 1.2841 (Jul 5 corrective high) followed by 1.2862 (76.4% retracement of the 1.2980 to 1.2478 decline).

• Yen 115.30

Initial support is located at 114.57 (July 5 low) followed by 114.09 (Jul 3 reaction low). Initial resistance is now at 115.80 (Jul 5 high) followed by 116.72 (June 26 reaction high).

• Pound – 1.8375

Initial support at 1.8295 (50% retracement of the 1.8090 to 1.8500 advance) followed by 1.8262 (Jun 30 low). Initial resistance is now at 1.8500 (Jun 30 high) followed by 1.8561 (Jun 16 reaction high).

• Australian Dollar – 0.7460

Initial support at 0.7407 (Jul 6 low) followed by 0.7378 (June 30 low). Initial resistance is now at 0.7477 (July 5 high) followed by 0.7505 (Jun 9 corrective high).