Australian FOREX Daily Outlook 07/09/2006

CURRENCY TRADING SUMMARY –7 SEPTEMBER06 (05:00GMT)

• U.S. Dollar Trading (USD) was broadly stronger against the majors in the overnight foreign exchange trading session as the US ISM non-manufacturing index rose whilst the Beige Book delivered a subdued look on the economy. The ISM non-manufacturing index rose strongly to 57 from an estimated 55 and a previous result of 54.8. The greenback did however lose some gains after the release of the Beige Book which noted slowing growth in 5 of the 12 Federal Reserve districts particularly the housing market and home construction which weakened throughout the nation. US Labour costs for the second quarter rose sharply to 4.9% from an estimated 3.8% In other markets, the Dow Jones index fell by 63pts and the NASDAQ fell by 38pts as the markets considered the implications of inflationary pressures on the economy as a result of higher labour costs. Crude oil fell by US$1.10 a barrel to US$67.50 as the market awaits US inventory data. Looking ahead, initial jobless claims are due out tonight.
  

• The Euro (EUR) traded within a low of 1.2772 and a high of 1.2831, before closing at 1.2805 in the New York session.
  

• The Japanese Yen (JPY) traded within a low of 115.99 and a high of 116.88 versus the dollar, before closing at 116.64 in the New York session. Looking ahead, machine tool orders are due out today.
  

• The Sterling (GBP) traded within a low of 1.8796 and a high of 1.8955, before closing at 1.8853 in the New York session. On the data front, industrial production came in as expected at 0.2% for the month of July. Looking ahead, the Bank of England interest rate announcement is due out today.
  

• The Australian Dollar (AUD) traded within a low of 0.7690 and a high of 0.7660, before closing at 0.7663 in the New York session. On the data front, unemployment came in at 4.9%, worse than the expected 4.8%. Looking ahead, Australian trade balance is due out tomorrow.
  
• Gold (XAU) fell by US$5.10 to US$631.80 an ounce on the back of profit taking after gains from the previous day.

TECHNICAL COMMENTARY

• Euro 1.2820

Initial support at 1.2755 (Sep 1 low) followed by 1.2723 (Aug 25 low). Initial resistance is now located at 1.2836 (Sep 6 high) followed by 1.288 (Aug 31 high).

• Yen 116.55

Initial support is located at 115.97 (Sep 6 low) followed by 115.56 (Sep 5 low). Initial resistance is now at 117.05 (76.4% retracement of the 117.51 to 115.56 decline) followed by 117.51 (Aug 31 reaction high).

• Pound – 1.8865

Initial support at 1.8775 (Aug 18 reaction low) followed by 1.8743 (38.2% retracement of the 1.8090 to 1.9146 advance). Initial resistance is now at 1.8957 (Sep 6 high) followed by 1.9094 (Aug 31 high).

• Australian Dollar – 0.7665

Initial support at 0.7649 (Sep 6 low) followed by 0.761 (Aug 31 low). Initial resistance is now at 0.7725 (May 17 high) followed by 0.7793 (May 11 trend high).

• Gold – 635

Initial support at 626.65 (Sep 5 low) followed by 618.5 (Aug 31 low). Initial resistance is now at 640.6 (Sep 5 high) followed by 645 (Aug 11 high).