Australian FOREX Daily Outlook 14/02/2006

MARKET SUMMARY –14FEB06 (05:00GMT)

• The Dollar weakened modestly against the major currencies overnight with traders choosing to square positions ahead of the Federal Reserve chairman’s testimony later in the week. There was little in the way of economic developments overnight, other than some upbeat comments by Cleveland Fed President Pianalto. Pianalto said that January data had been “reasonably good” and reminded of the possibility of an upward revision to the weak Q4 GDP growth. US sharemarkets fell overnight, dragged lower by weakness in the tech sector and interest rate concerns. The Dow Jones closed down 26pts while the NASDAQ was down 22pts. Crude oil prices eased to fresh six-week lows overnight to US$61.24 a barrel. Looking ahead and retail sales in due out later in the States today. US retail sales are expected to post another solid increase of 0.8% in January. This would result in a rise in annual growth to 7.0% from 6.3%. The milder than usual January weather is expected to have supported sales during the month.

• The Euro traded in a range of 1.1877 to 1.1914, before closing at 1.1898 in the New York session. In the absence of any data from the States or the Eurozone made for a lackluster session. The market will focus on the German ZEW survey and German GDP which is released later today in the Eurozone. Both numbers are expected to be firm with the ZEW expected to come in at 71.5 and GDP at 0.3%.

• The Japanese yen traded in a range of 117.62 to 118.26 versus the dollar, before closing in New York at 117.75. Yesterday in Japan, Governor Fukui said the BoJ needs to change its quantitative easing policy once economic conditions are favorable, and warned that the wrong timing could lead to confusion in the markets.

• The Sterling traded in a range of 1.7363 to 1.7447, before closing at 1.7410 in the New York session. The variance between UK producer input and output producer prices continued in January, reflecting the lack of pricing power currently affecting UK producers. Input prices rose 1.8% to bring annual inflation to 16.2%, while output prices rose 0.4% to bring annual inflation to 2.9%. The increases exceeded expectations.

• The Aussie traded in a range of 0.7365 to 0.7400, before closing near its lows in the New York session. The Aussie was quite resilient early in the session but poor retail sales in New Zealand saw the Kiwi sold off, dragging Aussie down at the end of the session.

TECHNICAL COMMENTARY

• Euro 1.1900

Initial support at 1.1876 (Feb 13 low) followed by 1.1800 (76.4% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.2027 (Feb 10 high) followed by 1.2047 (Feb 6 high).

• Yen 117.45

Initial support is located at 116.87 (Feb 10 low) followed by 116.41 (50% retracement of the 113.41 to 119.41 advance). Initial resistance is now at 118.28 (Feb 13 high) followed by 118.96 (Feb 10 high).

• Pound – 1.7420

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 1.7451 (Feb 13 high) followed by 1.7577 (Feb 10 high).

• Aussie – 0.7370

Initial support at 0.7362 (Feb 13 low) followed by 0.7317 (76.4% retracement of the 0.7233 to 0.7590 advance). Initial resistance at 0.7439 (Feb 10 high) followed by 0.7501 (Feb 6 high).