Australian FOREX Daily Outlook 14/03/2006

MARKET SUMMARY –14MAR06 (05:00GMT)

• The Dollar was slightly weaker versus the major currencies as the market interpreted comments by Federal Reserve President Janet Yellen to be mildly dovish. Yellen indicated that the Fed should be sensitive to the possibility of overshooting on tightening. In other markets, US shares traded sideways with the Dow Jones finishing flat and the NASDAQ up 5pts. Crude oil prices rose sharply overnight on renewed concerns that the dispute between western nations and Iran on nuclear research could lead to supply disruptions. Crude oil rose by US$1.81 to US$61.77 a barrel. Looking ahead and the current account and retail sales data will be released in the States later today. The expectation for the US current account is centered on -218bn. After a 2.3% spike in retail sales in January, the market expects retail sales to decline by 0.8% in February. A correction is likely in February after such a strong result in January.

• The Euro traded in a range of 1.1918 to 1.1965, before ending near its highs in the New York session. There were no major data releases in the Eurozone overnight. ECB President, Trichet, said today that economic growth in the world’s third largest economies was sufficiently robust to continue despite the first concerted round of interest rate rises in almost 6 years. The German ZEW survey is due out later today in the Eurozone and is likely to confirm another month of improving confidence. The market expectations are centered around 71.0.
• The Japanese yen traded in a range of 118.76 to 119.17 versus the dollar, before closing at 118.95 in the New York session. Yesterday in Japan, BoJ board member and usual hawk Mizuno said that rates should be high enough to provide flexibility for the BoJ to respond if the economy softens.

• The Sterling traded in a range of 1.7236 to 1.7335, before closing near its highs in the New York session. In the UK, PPI output prices rose by 0.3, above the +0.2% consensus, while the ODPM’s of house prices rose by 4.3% y/y, above the 3.2% consensus. This along with a number of UK-friendly M&amp A press reports helped the sterling to remain well supported.

• The Aussie traded in a range of 0.7317 to 0.7340, ending near its highs versus the dollar in the New York session.

• The Kiwi slumped this morning on the back of another soft retail sales report. Retail sales for January were flat m/m for the second consecutive month and against market expectations of a rise of 0.5% m/m.

• Gold prices rose overnight due to speculative buying as well as being dragged higher by firmer oil prices. Gold rose by US$6.20 an ounce to US$547.50 an ounce.

TECHNICAL COMMENTARY

• Euro 1.1975

Initial support at 1.1859 (Mar 10 low) followed by 1.1825 (Feb 27 low). Initial resistance is now located at 1.1971 (Mar 13 high thus far) followed by 1.2022 (Mar 7 high).

• Yen 118.50

Initial support is located at 117.96 (March 10 low) followed by 117.08 (March 9 low). Initial resistance is now at 119.41 (Feb 3, 2006 high) followed by 119.52 (76.4% retracement of the 121.41 to 113.41 decline).

• Pound – 1.7360

Initial support at 1.7230 (Mar 10 low) followed by 1.7129 (Dec 28 low). Initial resistance is now at 1.7420 (Mar 8 high) followed by 1.7509 (Mar 7 high).

• Aussie – 0.7335

Initial support at 0.7302 (Mar 10 low) followed by 0.7233 (Dec 27, 2005 low). Initial resistance at 0.7378 (Mar 9 high) followed by 0.7406 (Mar 7 high).