Australian FOREX Daily Outlook 19/01/2006

MARKET SUMMARY – 19/01/06(03.00GMT)

• The Dollar finished largely unchanged after a choppy trading session overnight. The US core CPI index rose 0.2% in December, as expected. Annual core inflation rose to 2.2% from 2.1% in November. The rise was the third consecutive monthly increase of 0.2%. The US headline CPI fell 0.1% in December the market expected a 0.2% rise. US net foreign security purchases were slightly stronger than expected in November, posting at $89.1 billion compared with the consensus of $85.0 billion. This suggests that the US continues to comfortably fund its current account deficit. In other markets, US stocks feel overnight following disappointing earnings from Intel Corp &amp Yahoo. The Down Jones closed down 41 pts, while the NASDAQ was down 23 pts. Crude oil fell by US58c to US$65.73 a barrel. Looking ahead, in the States later today will see the release of December housing starts and the Philly Fed survey. Building permits are expected to post at 2,100k, following an upwardly revised outcome of 2,163k in November. The market expects housing starts at 2,050k, following 2,123k in November. The Philly Fed survey is expected to bounce to 13.0 after the weak December reading.

• The Euro traded in a range of 1.2070 to 1.2162, before closing in New York at 1.2115.Euro traded to its highs on the back of comments by ECB”s Bini Smaghi who was quoted as saying current rates are too low in Europe given the Eurozone”s economic growth potential. Later, Bini Smaghi denies making any comment on interest rates and euro having already pulled back to 1.2135, slid to 1.2090 levels, en route to a low of 1.2070. On the data front, later today see the release of Eurozone December final CPI, expected to confirm the moderation in the headline rate to 2.2% from 2.3% as signaled by the flash estimate.

• The Japanese yen traded in a range of 114.81 to 115.43, before closing in New York at 115.25. The yen suffered on the back on the large sell-off in the Nikkei yesterday. Also yesterday, Japan’s diffusion index of leading economic indicators for November was revised down to 54.5 from a preliminary 60.0 on a scale of 100, the cabinet Office said on Wednesday. A reading above 50 indicates better conditions ahead.

• The Sterling traded in a range of 1.7586 to 1.7706, before closing in New York at 1.7635. Yesterday in the UK, average earnings growth was subdued in the three months to November at 3.4% compared to the same period the previous year. The result was in line with expectations and below the 10-year average of 4.1%The RICS house price index was reported at +8 for December, the highest reading since June 2004.

• The Aussie traded in a range of 0.7461 to 0.7505, before closing in New York at 0.7475. The Aussie suffered overnight from lower gold price and from New Zealand dollar weakness. Gold fell overnight following tame US inflation reading and a mixture of profit taking and Japanese investor selling. Gold fell $9.80 an ounce to $US544.50.

TECHNICAL COMMENTARY

• Euro – 1.2100

Initial support at 1.2007 (Jan 12 low) followed by secondary support at 1.1980 (50% retracement of the 1.1778 to 1.2181 advance). Initial resistance is now located at 1.2181 (Jan 6 high) followed by 1.2226 (61.8% retracement of the 1.2590 to 1.1638 decline).

• Yen – 115.35

Initial support is located at 114.62 (Jan 17 low) followed by 113.79 (Jan 16 low). Initial resistance is located at 115.91 (Jan 17 high &amp trendline resistance area) followed by 116.35 (61.8% of 118.16-113.41 decline and near Jan 5 high).

• Pound – 1.7610

Initial support is located at 1.7577 (Jan 12 low) followed by 1.7516 (Jan 11 low). Initial resistance is located at 1.7810 (Dec 14 high) followed by 1.7901 (Oct 27 high).

• Aussie – 0.7460

Initial resistance is located at 0.7580 (Dec 14 high) followed by 0.7605 (Oct 27 high). Initial support is located at 0.7446 (38.2% retracement of the 0.7235-0.7577 high) followed by 0.7406 (50.0% retracement of the 0.7235-0.7577 high).