Australian FOREX Daily Outlook 08/03/2006

MARKET SUMMARY –08MAR06 (05:00GMT)

• The Dollar continued to make further gains against major currencies overnight, after Federal Reserve president William Poole warned of more rate hikes if US economic data remained strong. On the data front, US productivity growth in December quarter was revised to show a decline of 0.5%, compared with the previously 0.6% fall. Unit labour costs grew by 3.3% in the December quarter, down from the previously-reported 3.5% increase. In other markets, US shares were mixed with the Dow Jones index up 22 pts and the NASDAQ down 17 pts. Crude oil prices continued to fall as investors expect OPEC to leave production quotas unchanged at Wednesday’s meeting. Crude oil fell by US83c to US$61.58 a barrel.

• The Euro traded down from 1.1975 to 1.1868, before closing at 1.1890 in the New York session.The Euro suffered from dollar strength across the board. On the data front, German factory orders rose by 1.4% in Januarywith export demand a major driver of the rise. Background demand in the German industrial sector is gradually improving. In other news, the EU commission has given Germany another year to rectify its Budget deficit problem. The EUC will allow Germany to exceed its Budget deficit target of 3% of GDP for a 5^th year in 2006.

• The Japanese yen traded in a range of 117.51 to 118.06 versus the dollar, before closing at 117.85 in the New York session. In Japan today, the diffusion index of leading economic indicators rose to a preliminary 85.0 in January. The index, in which a reading above 50 suggests an economic expansion in the months ahead, was up from December’s revised 75.0 and above 50 for the fourth straight month. Also in Japan today, the BOJ board begins its two day meeting and will be making a decision on monetary policy tomorrow. Analysts are divided on the chances of the BOJ ending quantitative easing tomorrow.

• The Sterling traded down from 1.7508 to a low of 1.7330, before closing at 1.7360 in the New York session.

• The Aussie continued its slide, falling from 0.7385 to a low of 0.7330 before closing near its lows in the New York session. Today in Australia, the RBA left rates unchanged which was as expected.

• Gold fell by US$2.30 an ounce to US$554.50 an ounce.

TECHNICAL COMMENTARY

• Euro 1.1885

Initial support at 1.1825 (Feb 27 low) followed by 1.1800 (76.4% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.2094 (Mar 6 high) followed by 1.2133 (61.8% retracement of the 1.2324 to 1.1825 decline).

• Yen 117.50

Initial support is located at 116.04 (March 6 low) followed by 115.45 (March 1 low and 10 month trendline support). Initial resistance is now at 118.54 (Feb 23 high &amp approx 76.4% retracement of 119.41 to 115.45 decline) followed by 119.01 (Feb 21 high).

• Pound – 1.7360

Initial support at 1.7329 (Mar 7 low) followed by 1.7278 (Feb 14 low). Initial resistance is now at 1.7626 (Mar 6 high) followed by 1.7685 (61.8% retracement of the 1.7937 to 1.7278 decline).

• Aussie – 0.7335

Initial support at 0.7317 (76.4% retracement of the 0.7233 to 0.7590 advance) followed by 0.7233 (Dec 27, 2005 low). Initial resistance at 0.7407 (Mar 7 high) followed by 0.7488 (Mar 2 high).