Australian FOREX Daily Outlook 18/04/2006

MARKET SUMMARY –18APRIL06 (05:00GMT)

• The Dollar traded down against the major currencies overnight despite the announcement of strong portfolio flows into the US for the month of February. The market seems to be focusing on tensions with Iran and the belief that the Federal Reserve is close to ending its rate hiking cycle. Net capital flows into US assets rose more than expected to $86.9 billion in February. The New York ‘Empire State’ manufacturing activity index fell in April to 15.81. The market expected a reading of 24.50. Looking ahead, and the PPI and the FOMC minutes for March are both due out in the States later today. The headline PPI index is expected to unwind some of February’s large fall in March, with consensus expecting an increase of 0.4%. Core PPI inflation is expected to rise by 0.2%.

• The Euro traded up from a low of 1.2113 to a high of 1.2289, before closing at 1.2250 in the New York session.

• The Japanese yen traded in a range of 117.54 to 118.60, before closing at 117.80 in the New York session. Yesterday in Japan, BoJ Governor Fukui spoke and his comments were fairly neutral. He indicated the BoJ will implement appropriate policy and said that he believes it is highly likely that Japan will achieve long-lasting, sustainable growth.

• The Sterling traded up from 1.7515 to a high of 1.7748, before closing at 1.7710 in the New York session.
  
• The Aussie traded up from 0.7275 to a high of 0.7386, before closing at 0.7375 in the New York session. The Aussie is benefiting from the weak US dollar and stronger commodity prices.
  
• Gold hit fresh 25- year highs in New York following safe haven buying on more concern over Iran and a weaker dollar. Gold rose by US$17.50 an ounce to US$618.80.

TECHNICAL COMMENTARY

• Euro 1.2265

Initial support at 1.2120 (Apr 17 low) followed by 1.2066 (Apr 12 low). Initial resistance is now located at 1.2289 (Apr 17 high) followed by 1.2335 (Apr 6 high).

• Yen 117.80

Initial support is located at 117.52 (Apr 17 low) followed by 117.26 (Apr 6 low). Initial resistance is now at 118.90 (Apr 11 high) followed by 119.21 (Mar 13 reaction high).

• Pound – 1.7710

Initial support at 1.7460 (Apr 12 low) followed by 1.7375 (Apr 10 low). Initial resistance is now at 1.7770 (76.4% retracement of the 1.7250 to 1.7619 advance) followed by 1.7829 (Feb 3 high).

• Aussie – 0.7390

Initial support at 0.7237 (Apr 13 low) followed by 0.7196 (Apr 5 low).Initial resistance is now at 0.7413 (Apr 17 high) followed by 0.7450 (Mar 15 reaction high).