Australian FOREX Daily Outlook 19/07/2006

CURRENCY TRADING SUMMARY –19JULY06 (05:00GMT)

• U.S. Dollar Trading (USD) was generally stronger in the overnight foreign exchange trading session, as higher than expected PPI data was released to the forex market prompting a rally in the greenback. Headline US Producer Price index (PPI) rose by 0.5% in June with the market expecting a rise of only 0.3%. The core PPI stood at 0.2% which was in line with expectations. In other markets, the Dow Jones index lifted by 52pts while the NASDAQ gained 5pts. Crude oil fell again as there is growing optimism that the fighting between Israel and Hezbollah will not spill over into neighbouring countries. Crude oil fell US$1.76 a barrel to US$73.54. Looking ahead, US CPI is due out today and US Federal Reserve Chairman Ben Bernanke addresses congress in his semi-annual speech to the committee.
  

• The Euro (EUR) traded within a low of 1.2475 and a high of 1.2559, before closing at 1.2504 in the New York session. On the data front, the German ZEW survey dropped from 37.8 to 15.1 for July after the market had expected a modest fall to 35.0. Looking ahead the Eurozone trade balance is due out today.

• The Japanese Yen (JPY) traded within a low of 116.71 and a high of 117.58 versus the dollar, before closing at 117.32 in the New York session. Looking ahead, the BoJ minutes are due out tomorrow.

• The Sterling (GBP) traded within a low of 1.8184 and a high of 1.8330, before closing at 1.8264 in the New York session. On the data front, CPI impressed rising 0.3% in June compared to an estimated rise of 0.1%.
  

• The Australian Dollar (AUD) traded within a low of 0.7460 and a high of 0.7485, before closing at 0.7471 in the New York session.

• Gold (XAU) dropped again by US$22.40 to US$629.50 an ounce following a wave of speculative selling on the back of a stronger USD. In the base metal market, Nickel pulled back from record highs, dropping 6.0pct.

Initial support at 627.83 (Jul 18 low) followed by 620.7 (Jul 10 reaction low). Initial resistance is now at 676.35 (Jul 17 high) followed by 686.18 (76.4% retracement of the 730.25-543.50 decline).