Australian FOREX Daily Outlook 17/07/2006

CURRENCY TRADING SUMMARY –17JULY06 (05:00GMT)

• U.S. Dollar Trading (USD) strengthened against the majors in the overnight foreign exchange trading session even as data showed softer-than-expected US consumer sentiment and retails sales, as concerns over escalating violence in the Middle East prompted a safe-haven rally. The Michigan survey fell to 83.0 from 84.9 the previous month. US retail sales fell by 0.1% compared to a rise of 0.1% in May and an expected 0.4% rise by the market. Soft data coupled with dovish comments by the BoJ after finally ending their 6 year zero interest rate policy, helped to support the greenback further. In other markets, the Dow Jones fell by 107pts while the NASDAQ fell by 17pts on the back of escalating violence in the Middle East. Crude oil rose by US33c to US$77.03 a barrel amidst the Mid-East violence and explosions in Nigeria. Looking ahead, the New York Fed Survey is due out today.
  

• The Euro (EUR) traded in a range of 1.2630 to 1.2692, before closing at 1.2650 in the New York session. Looking ahead, industrial production and HICP numbers are due out today.
  

• The Japanese Yen (JPY) traded in a range of 115.44 to 116.37 versus the dollar, before closing at 116.10 in the New York session. On the data front, the BoJ decided to increase interest rates to 0.25% ending a 6 year stint on zero interest. Comments afterwards suggested that the BoJ will only increase rates again if data coming out of Japan warrant a rise.
  

• The Sterling (GBP) traded in a range of 1.8343 to 1.8447, before closing at 1.8395 in the New York session.
  

• The Australian Dollar (AUD) traded in a range of 0.7483 to 0.7548, before closing at 0.7545 in the New York session. On the data front, the Australian trade deficit doubled to $2.3 billion in May compared to a result in February of $0.4 billion.
  
• Gold (XAU) strengthened by US$13.60 to US$668.00 an ounce as market participants sought a safe haven amidst the turmoil in the Middle East.

TECHNICAL COMMENTARY

• Euro 1.2635

Initial support at 1.2626 (61.8% retracement of the 1.2478 to 1.2865 advance) followed by 1.2569 (76.4% retracement of the 1.2478 to 1.2865 advance). Initial resistance is now located at 1.2781 (July 12 high) followed by 1.2865 (Jul 7 high and 76.4% of 1.2980-1.2478 decline).

• Yen 116.25

Initial support is located at 115.33 (July 14 low) followed by 114.17 (Jul 11 high). Initial resistance is now at 116.18 (Jul 14 high) followed by 116.72 (Jun 27 reaction high).

• Pound – 1.8380

Initial support at 1.8309 (Jul 12 low) followed by 1.8295 (50% retracement of the 1.8090 to 1.8500 advance). Initial resistance is now at 1.8482 (July 12 high) followed by 1.8541 (July 7 high).

• Australian Dollar – 0.7515

Initial support at 0.746 (Jul 11 low) followed by 0.7399 (Jul 5 low). Initial resistance is now at 0.7568 (July 13 high) followed by 0.7594 (61.8% retracement of the 0.7795-0.7269 decline).

• Gold – 673

Initial support at 620.7 (Jul 10 low) followed by 610.5 (short-term trendline support). Initial resistance is now at 674.83 (May 23 high) followed by 686.18 (76.4% retracement of the 730.25-543.50 decline).