Australian FOREX Daily Outlook 20/02/2006

MARKET SUMMARY –20FEB06 (05:00GMT)

• The Dollar weakened slightly against the major currencies on Friday as traders preferred to focus on the weaker-than-expected consumer sentiment reading rather than the sharp lift in core producer prices. The University of Michigan consumer sentiment index eased from 91.2 to 87.4 in February, short of market expectations centered on a result near 91.5. The US producer price index rose by 0.3% in January with the core rate (excludes food &amp energy) up 0.4%. Economists were looking for 0.2% gains for both measures. In other markets, US shares were slightly lower with the Dow Jones down 6pts and the NASDAQ down 12pts. Crude oil rose by US$1.42 to US$59.88 a barrel. Looking ahead and the US markets are closed for the Presidents Day holiday.

• The Euro traded up from 1.1856 to a high of 1.1942, closing the New York session near its highs.

• The Japanese yen traded in a range of 117.85 to 118.83 versus the US dollar, before closing at 118.05 in the New York session. In Japan on Friday, GDP rose by 1.4% in Q4 compared to market expectations for 1.2% growth. This took annualised growth to 5.5%.

• The Sterling traded in a range of 1.7350 to 1.7430, before closing near its highs in the New York session.

• The Aussie traded up from 0.7350 to a high of 0.7390, before closing near its highs in the New York session. In Australia on Friday, RBA Governor Macfarlane presented his semi-annual testimony to Parliament. McFarlane said that inflation may face upward pressure and that a rate rise was more likely than a cut. The Aussie rallied to 0.7415 on these comments before settling back down around 0.7390.

• Gold rose to its highest level in a week on Friday, as traders covered positions ahead of the US holiday weekend. Gold rose by US$5.80 an ounce to US$554.60 an ounce.

TECHNICAL COMMENTARY

• Euro 1.1960

Initial support at 1.1860 (Feb 14 low) followed by 1.1800 (76.4% retracement of 1.1638 to 1.2324). Initial resistance is now located at 1.2027 (Feb 10 high) followed by 1.2047 (Feb 6 high).

• Yen 118.10

Initial support is located at 117.32 (Feb 17 low) followed by 116.75 (Feb 15 low). Initial resistance is now at 118.87 (Feb 17 high) followed by 119.41 (Feb 3 high).

• Pound – 1.7450

Initial support at 1.7329 (Feb 17 low) followed by 1.7278 (Feb 14 low). Initial resistance is now at 1.7486 (Feb 15 high) followed by 1.7577 (Feb 10 high).

• Aussie – 0.7410

Initial support at 0.7356 (Feb 14 low) followed by 0.7317 (76.4% retracement of the 0.7233 to 0.7590 advance). Initial resistance at 0.7442 (Feb 15 high) followed by 0.7501 (Feb 6 high).