Australian FOREX Daily Outlook 10/02/2006

MARKET SUMMARY –10FEB06 (05:00GMT)

• The Dollar was predominantly range bound in lackluster trading overnight. On the data front US jobless claims rose 4,000 to 277,000, providing more evidence of a tight labour market. The other key event was Chicago Fed President Moscow who spoke overnight, and reiterated the prevailing FOMC view that future rate hikes would be data dependent.In other markets, share indexes were mixed with the Dow Jones closing up 24pts while the NASDAQ was down 11pts. Crude oil prices were unchanged overnight at US$62.55 a barrel. Looking ahead and the US trade balance will be released later today in the States. The US trade deficit is expected to widen marginally after narrowing more than expected in November. The consensus is for an annual deficit of US$64.5 billion, following US$64.2 billion in November.

• The Euro traded in a range of 1.1948 to 1.1994, before closing at 1.1980 in the New York session. The key data releases in the Eurozone later today will be German CPI and French industrial production.

• The Japanese yen traded in a range of 118.30 to 118.88, before closing near its highs in the New York session. Yesterday, the Bank of Japan left interest rate policy unchanged as expected. At the press conference that followed, BoJ governor Fukui said he could not say if policy would be shifted at next month’s meeting.

• The Sterling traded down from 1.7476 to as low as 1.7376, before closing at 1.7415 in the New York session. As expected the Bank of England left its policy rate on hold at 4.50%. The general feeling in the market is that Stephen Nickell again voted for a 25bp rate cut and was joined by Kate Barker, resulting in a 7-2 vote in favour of leaving the rate unchanged. The data from the UK in recent weeks have continued to be mixed, but at the margin the tone has probably been more on the negative side.

• The Aussie dollar traded in a range of 0.7390 to 0.7410, before closing at 0.7400 in the New York session. Gold rallied today from 550usd per ounce to current levels of 565usd. The gold is higher as funds and speculators rebuild long positions after a sharp two day sell off that trimmed about 3.5% off the price.

TECHNICAL COMMENTARY

• Euro 1.1985

Initial support at 1.1923 (Feb 8 low) followed by 1.1900 (61.8% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.2047 (Feb 6 high) followed by 1.2113 (Feb 2 reaction high).

• Yen 118.40

Initial support is located at 117.40 (38.2% retracement of the 114.17 – 119.38 rally) followed by 116.69 (Jan 31 corrective low). Initial resistance is now at 119.41 (Feb3 high) followed by 121.07 (Dec 12 high).

• Pound – 1.7440

Initial support at 1.7377 (Feb 8 low) followed by 1.7320 (76.4% retracement of the 1.7129 to 1.7937 advance). Initial resistance is now at 1.7517 (Feb 7 high and former support from Jan 11) followed by 1.7643 (Feb 6 high).

• Aussie – 0.7395

Initial support at 0.7369 (61.8 retracement of the 0.7233 to 0.7590 advance) followed by 0.7317 (76.4% retracement of the 0.7233 to 0.7590 advance). Initial resistance at 0.7451 (Feb 7 high and area of former support from Jan 19) followed by 0.7501 (Feb 6 high).