Australian FOREX Daily Outlook 16/05/2006

MARKET SUMMARY –16MAY06 (05:00GMT)

• The Dollar rose sharply against major currencies on the back of rising commodity prices. Commodity prices plunged across the board on Monday as speculators sought to unwind over-bought positions. On the data front, growth in net US foreign security purchases was lower than expected for March. Purchases rose by US$69.8billion, versus the market’s expectation of US$79.9billion and down from US$90.5billion the previous month. The US Empire State manufacturing index fell from 15.81 to 12.36 in May, its lowest level in 11 months. In other markets, US stocks made a rebound in the last hour of trading with investors comforted by the lower commodity prices. The Dow Jones index ended higher by 47pts and the NASDAQ fell by 5pts. Crude oil fell by US$2.63 or to US$69.41 a barrel. Looking ahead, US PPI data is due out later today in the States with analysts forecasting +0.8% for April. This will take annual PPI to 3.8%.
  

• The Euro traded in a range of 1.2778 to 1.2908, before closing at 1.2800 in the New York session. On the data front, Bank of France business sentiment indicator fell slightly in March. The market will now focus on the German ZEW survey due out later today in the Eurozone. The market expects the survey to print at 60.0.

• The Japanese yen traded in a range of 109.64 to 110.59 versus the dollar, before closing at 110.50 in the New York session. Today in Asia, BoJ’s Fukui reiterated again to markets that removal of excess liquidity and monetary tightening are not the same thing. This, together with the weak machine orders data yesterday dampened rate hike sentiment and caused the weakening of the yen against the dollar. The April consumer confidence numbers are due out later today.
  
• The Sterling traded in a range of 1.8830 to 1.8756, before closing at 1.8785 in the New York session. On the data front, CPI numbers will be out later today
  

• The Aussie traded in a range of 0.7595 to 0.7673, before closing at 0.7612 in the New York session. On the data front, the Wage Price Index is due out tomorrow.
  
• Gold recorded its biggest one-day fall in six years falling US$26.80 an ounce or 3.7% to US$685.00.

TECHNICAL COMMENTARY

• Euro 1.2823

Initial support at 1.2702 (23.6% retracement of the 1.1825 to 1.2973 advance) followed by 1.2660 (May 9 low). Initial resistance is now located at 1.2973 (May 15 high) followed by 1.3000 (Psychological resistance).

• Yen 110.20

Initial support is located at 109.21 (61.8% retracement of the 101.67 to 121.41 advance) followed by 108.76 (Sep 5, 2005 reaction low). Initial resistance is now at 110.74 (May 12 high) followed by 111.54 (May 11 corrective high).

• Pound – 1.8836

Initial support at 1.8788 (May 15 low) followed by 1.853 (May 11 corrective low). Initial resistance is now at 1.9000 (May 12 high) followed by 1.9078 (May 5, 2005 corrective high).

• Aussie – 0.7638

Initial support at 0.7606 (May 15 low) followed by 0.7551 (May 2 corrective low). Initial resistance is now at 0.7749 (May 15 high) followed by 0.7795 (May 11 reaction high).