Australian FOREX Daily Outlook 10/03/2006

MARKET SUMMARY –10MAR06 (05:00GMT)

• The Dollar shrugged of a record trade deficit and continued to make gain against the major currencies overnight. The market continues to focus on inflationary issues rather than structural areas of the economy, and continue to buy dollars in expectation of strong payrolls data tonight. The US posted a record trade deficit in January of US$68.5b. The market was expecting a deficit of around of around $65.5b. In other markets, US shares drifted lower ahead of the key US jobs data. The Dow Jones index was down by 33pts while the NASDAQ closed down 17pts. Crude oil prices rose overnight as Iran vowed not to compromise in its nuclear dispute with the West. Crude oil rose by US45c to US$60.47 a barrel. In the US later today, the February non-farm payrolls report is due. The market expects jobs growth of 200k and the unemployment rate to tick higher to 4.8% from 4.7%.
  

• The Euro traded in a range of 1.1904 to 1.1948, before closing at 1.1910 in the New York session. In the Eurozone yesterday, German industrial output was down 0.1% in January, disappointing expectations of a plus 1% result. The Finance Minister said the data was affected by cold weather, and “unpredictability” in energy sector.

• The Japanese yen traded in volatile range of 117.09 to 118.43 versus the dollar, before closing at 118.20 in the New York session. Yesterday in Japan, The Bank of Japan ended a five-year-old experiment with ultra-loose monetary policy and returned to a conventional interest rate regime, but said short-term rates would be kept around zero for now. The decision represents a first step towards an eventual interest rate rise in a country where rates have been virtually zero for most of the last seven years and reflects the central bank’s confidence that deflation has finally been beaten.

• The Sterling traded in a range of 1.7345 to 1.7413, before closing at 1.7360 in the New York session. Yesterday in the UK, the Bank of England kept rates at 4.50% as expected. On the data front, UK manufacturing production rose 0.2% and industrial production rose 0.4%. Industrial output rose due to firmer mining, oil and gas output. The trade deficit fell to GBP 5.7bn in January from 6.1bn in February.

• The Aussie traded in a range of 0.7335 to 0.7376, before closing at 0.7340 in the New York session.

• Gold moved higher overnight, lifting from $540.05 to $550.40, currently at 546 dollar per ounce. The gold rallied today from three week lows on speculative and trade buying early, retracing back after a 1.8% drop previously, with added help from U.S. economic data and firmer crude oil.

TECHNICAL COMMENTARY

• Euro 1.1910

Initial support at 1.1868 (Mar 7 low) followed by 1.1825 (Feb 27 low). Initial resistance is now located at 1.2022 (Mar 7 high) followed by 1.2094 (Mar 6 high).

• Yen 118.35

Initial support is located at 117.32 (March 8 low) followed by 116.04 (March 6 low). 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 – 1.7355

Initial support at 1.7329 (Mar 7 low) followed by 1.7278 (Feb 14 low). Initial resistance is now at 1.7420 (Mar 8 high) followed by 1.7509 (Mar 7 high).

• Aussie – 0.7340

Initial support at 0.7316 (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).