Australian FOREX Daily Outlook 09/06/2006

MARKET SUMMARY –9 JUNE06 (05:00GMT)

• The Dollar continued its impressive strength against the major currencies in the overnight session, after the ECB decided to lift interest rates by only 25 basis points. The markets were hoping for a 50 basis point increase and this was reflected on the US dollar, making gains against other major currencies. ECB President Jean-Claude Trichet gave no clear indication of the central bank increasing its monetary policy tightening. In separate remarks, Federal Reserve Governor Donald Kohn noted that some measures of inflation expectations have moved higher. Adding to the US momentum, US weekly jobless claims fell to their lowest levels in two months surprising the market. Claims fell by 35,000 to 302,000 with economists forecasting a drop to only 325,000. In other markets, the Dow Jones index at one stage was down by 173pts before climbing back up to finish 8pts higher, while the NASDAQ fell by 6pts. Crude oil fell by US47c to US$70.35 a barrel after the confirmed death of Al Qaeda leader in Iraq Abu Musab al-Zarqawi which analysts hope will reduce instability in Iraq’s wrecked oil industry. Looking ahead, the US trade balance is due out today.
  

• The Euro traded in a range of 1.2627 to 1.2807, before closing at 1.2650 in the New York session. On the data front, the ECB decided to raise interest rates by 25 basis points to 2.75% which was in line with the general consensus.
  

• The Japanese yen traded in a range of 113.38 to 114.72 versus the dollar, before closing at 114.24 in the New York session. On the data front, private machinery orders are due out today.
  

• The Sterling traded in a range of 1.8371 to 1.8577, before closing at 1.8436 in the New York session. On the data front, the BoE decided to keep rates steady at 4.5% which was in accordance with the general market expectation.
  

• The Aussie traded in a range of 0.7403 to 0.7461, before closing at 0.7421 in the New York session.
  

• Gold fell by US$18.80 to $613.80 an ounce dragged down by speculative selling on the back of the US dollar strength and the fall in oil prices. Base metals in general retreated heavily with copper falling 6% and zinc 8%.

TECHNICAL COMMENTARY

• Euro 1.2650

Initial support at 1.2625 (June 8 low) followed by 1.2587 (38.2% retracement of the 1.1951-1.2980 rally). Initial resistance is now located at 1.2935 (June 6 high) followed by 1.298 (June 5 high).

• Yen 113.90

Initial support is located at 112.91 (June 7 low) followed by 112.06 (June 6 low). Initial resistance is now at 115.11 (61.8% retracement of the 118.90-108.98 decline) followed by 115.98 (April 24 high and former gap low).

• Pound – 1.8435

Initial support at 1.8348 (38.2% retracement of the 1.7230 to 1.9027 advance) followed by 1.8206 (May 2 low). Initial resistance is now at 1.8649 (June 7 corrective high) followed by 1.8774 (June 6 corrective high).

• Aussie – 0.7420

Initial support at 0.7357 (April 20 low) followed by 0.7313 (61.8% retracement of 0.7015-0.7795 rise). Initial resistance is now at 0.7487 (June 6 high) followed by 0.7547 (June 5 high).