Australian FOREX Daily Outlook 09/05/2006

MARKET SUMMARY –09MAY06 (05:00GMT)

• The Dollar was initially sold in the overnight session but managed to recover from multi-month lows against the major currencies as traders took profit on positions ahead of some key events. The market is waiting for the Federal Reserve interest rate decision due on Wednesday and the US Treasury report due out at some stage this week. In other markets, US shares were slightly firmer in lackluster trade with the Dow Jones index up 7pts and the NASDAQ up 2 pts. Crude oil prices were slightly lower overnight by US42c to US$69.77 a barrel.
  

• The Euro traded in a range of 1.2693 to 1.2788, before closing at 1.2710 in the New York session. Overnight, ECB’s Garganas said he was unconcerned about the Euro’s rise, sees it as only having a small impact on exports. Believes the Euro’s rise reflects changing rates of return for Euro assets as Fed rate hikes near their end. On the data front, German March factory orders reported up 15% y/y above consensus of 12.4%.

• The Japanese yen traded in a range of 110.99 to 111.78 versus the dollar, before closing at 111.60 in the New York session. Overnight, the Chairman of Japan’s Business Federation, Hiroshi Okuda called for the government to intervene in the currency market should USDJPY break below 110 and hold those levels. His main reason was that some Japanese companies had assumed USDJPY at 113.00 when making financial projections. Analysts suggest the BoJ is unlikely to intervene and would have limited impact should they intervene.
  
• The Sterling traded in a range of 1.8548 to 1.8690, before closing at 1.8580 in the New York session. Earlier the BRC April like-for-like sales rose by 6.8% y/y. which was the strongest rise in 4 years. Overnight, the PPI for April came in firmer than expected with output prices up 0.6% m/m versus 0.4% consensus and input prices were up 2.5% versus a 1.5% consensus.

• The Aussie traded in a range of 0.7679 to 0.7745, before closing 0.7680 in the New York session. The Australian is handed down tonight but this is expected to have minimal impact on the market.
  
• Gold eased from 25 year highs overnight by US$4.40 an ounce to US$679.90.

TECHNICAL COMMENTARY

• Euro 1.2700

Initial support at 1.2672 (May 5 low) followed by 1.2571 (May 4 corrective low). Initial resistance is now located at 1.2789 (May 8 high) followed by 1.2889 (50% retracement of the 1.3663 – 1.1638 decline).

• Yen 111.65

Initial support is located at 110.97 (May 8 corrective low) followed by 110.00 (Psychological support). Initial resistance is now at 112.20 (May 8 high) followed by 114.18 (May 4 reaction high).

• Pound – 1.8560

Initial support at 1.8474 (May 5 low) followed by 1.8335 (May 4 corrective low). Initial resistance is now at 1.8692 (Mar 8 corrective high) followed by 1.8706 (Mar 28, 2005 low).

• Aussie – 0.7690

Initial support at 0.7651 (May 4 reaction low) followed by 0.7600 (May 3 low). Initial resistance is now at 0.7745 (May 8 high) followed by 0.7760(76.4% retracement of the 0.7990 to 0.7015 decline).