Australian FOREX Daily Outlook 10/04/2006

MARKET SUMMARY –10APRIL06 (05:00GMT)

• The Dollar continued to strengthen against the major currencies on Friday night, after firmer than expected employment figures raised the prospect of further US rate hikes in coming months. US non-farm payrolls (employment) rose by 211,000 in March, ahead of forecasts centered on an increase of 190,000 jobs. The unemployment rate fell from 4.8% to a 4 ½ low of 4.7%. The Fed’s Poole also contributed to higher US yields and a stronger dollar, by saying that at 5.25% Fed funds rate would be reasonable for now. In other markets, US shares fell sharply on Friday as investors were concerned about the possibility of further rate hikes. The Dow Jones index fell by 96pts while the NASDAQ was lower by 22pts. Crude oil traded lower on hopes of a restoration of production in Nigeria. Crude oil fell by US59c to US$67.35 a barrel.
  

• The Euro fell from 1.2231 to a low of 1.2085, before closing at 1.2095 in the New York session. On Friday, Bundesbank President Weber remained upbeat on the German economic outlook, pointing to signs that household spending strengthened at the start of the year. Italians went to the polls on Sunday and continue voting today however analysts don’t expect any market impact from these elections.

• The Japanese yen traded in a range of 117.48 to 118.37 versus the dollar, before closing at 118.25 in the New York session. The BoJ begins its two-day board meeting today and while no new policy announcements are likely, BoJ commentswill be watched following the meeting for further insight into timing of liquidity withdrawal and rate hikes.
  

• The Sterling traded down from a high of 1.7531 to as low as 1.7395, before closing at 1.7430 in the New York session.
  

• The Aussie dollar fell from 0.7342 to a low of 0.7253, before closing near its lows in the New York session.

• Gold traded over a wide range of US$589.50 to 603.10 an ounce, before closing at US$592.70.

TECHNICAL COMMENTARY

• Euro 1.2115

Initial support at 1.2031 (Apr 3 reaction low) followed by 1.1951 (Mar 24 low). Initial resistance is now located at 1.2235 (Apr 7 high) followed by 1.2335 (Apr 6 high).

• Yen 117.95

Initial support is located at 117.26 (Apr 6 low) followed by 116.68 (Apr 5 low). Initial resistance is now at 118.40 (Apr 7 high) followed by 118.82 (Apr 3 high).

• Pound – 1.7450

Initial support at 1.7394 (Apr 7 low) followed by 1.7369 (Apr 4 low). Initial resistance is now at 1.7626 (Mar 6 high) followed by 1.7667 (61.8% retracement of the 1.7937 to 1.7230 decline).

• Aussie – 0.7280

Initial support at 0.7260 (Apr 6 low) followed by 0.7196 (Apr 5 low). Initial resistance is now at 0.7343 (Apr 7 high) followed by 0.7370 (61.8% retracement of the 0.7590 to 0.7015 decline).