Australian FOREX Daily Outlook 12/04/2006

MARKET SUMMARY –12APRIL06 (05:00GMT)

• The Dollar softened against the major currencies overnight with some flows into “safe haven” currencies after Iran said that it had successfully enriched uranium. On the news front, Minneapolis Fed President Gary Stern said that economic forecasts will be central to Fed decision making because of the lags between interest rate changes and the economic impact. In other markets, US shares were dragged low by weakness amongst technology stocks. The Dow Jones index fell by 52pts while the NASDAQ fell by 23pts. Crude oil rose modestly by US24c to US$68.98 a barrel. Looking ahead and the trade balance for February is due out in the States later today with the market projecting a slight contraction in the deficit to US$67.5 bln compared with US$68.5 bln the month before.

• The Euro ignored the disappointing data and strengthened versus the dollar. The Euro traded up from a low of 1.2096 to a high of 1.2155, before closing at 1.2140 in the New York session. The German ZEW economic sentiment survey unexpectedly fell for a third month in a row in April, from 63.4 to 62.7. The market had expected a rise to 65.5. On the comment front, ECB council member Mersch indicated that risks to inflation remain to the upside and that “we can act at any time” and fellow council member Liebscher signaled a June hike remains in prospect.

• The Japanese yen traded in a range of 118.19 to 118.90 versus the dollar, before closing at 118.30. In Japan yesterday, the BoJ monthly report kept economic assessment unchanged, but sees the level of economic activity rising, sees Japanese economy recovering steadily, expects the positive trend in consumer prices to continue. BoJ Governor Fukui gives no hints re the timing of interest rate changes in Japan. Thinks BoJ is moving on reducing quantitative easing at the appropriate pace, thinks it too early to be passing judgment on market rates after the policy shift.
  
• The Sterling traded higher from 1.7394 to a high of 1.7495, before closing at 1.7485 in the New York session. The UK trade deficit was wider than expected in February at GBP 6,478 million versus expectation of 5,750 million.

• The Aussie traded in a range of 0.7302 to 0.7340, before closing near its highs in the New York session.
  
• Gold retraced from fresh 25-year highs on profit-taking. Gold fell by US$2.40 an ounce to US$599.40.

TECHNICAL COMMENTARY

• Euro 1.2150

Initial support at 1.2075 (Apr 10 low) followed by 1.2031 (Apr 3 reaction low). Initial resistance is now located at 1.2235 (Apr 7 high) followed by 1.2335 (Apr 6 high).

• Yen 118.25

Initial support is located at 117.26 (Apr 6 low) followed by 116.68 (Apr 5 low). Initial resistance is now at 118.90 (Apr 11 high) followed by 119.21 (Mar 13 reaction high).

• Pound – 1.7440

Initial support at 1.7375 (Apr 10 low) followed by 1.7337 (76.4% retracement of the 1.7250 to 1.7619 advance). Initial resistance is now at 1.7535 (Apr 7 high) followed by 1.7626 (Mar 6 reaction high).

• Aussie – 0.7330

Initial support at 0.7255 (Apr 10 low) followed by 0.7219 (38.2% retracement of the 0.7015 to 0.7345). Initial resistance is now at 0.7345 (Apr 7 high corrective) followed by 0.7370 (61.8% retracement of the 0.7590 to 0.7015 decline).