Australian FOREX Daily Outlook 20/11/2006

US housing starts fall sharply. G20 summit highlights economic growth concerns. Greenback weakens.

CURRENCY TRADING SUMMARY –20 NOVEMBER 06 (23:30GMT)

• U.S. Dollar Trading (USD) lost some ground against the majors in the overnight foreign exchange trading session as US housing starts fell 14% in October prompting concern about the size of the US housing slowdown. US housing starts fell to 1.486mln from 1.74mln in September and compared to an estimated 1.69mln. The G20 summit held in Melbourne, Australia warned that rate rises would be seen in many economies. “Maintaining strong world growth and containing inflation will require ongoing adjustments to monetary and fiscal policies while ensuring appropriate exchange rate flexibility and structural reform,” the G20 statement highlighted. In other markets, the Dow Jones index rose by 36pts and the NASDAQ gave up 3pts as the poor housing starts weighed on building companies. Crude oil fell by US45c to US$55.81 as the market shrugged off comments from Algeria and the UAE that OPEC may need to cut production again in December. Looking ahead, the leading indicator is due out tonight.
  

• The Euro (EUR) traded within a low of 1.2765 and a high of 1.2844, before closing at 1.2815 in the New York session.
  

• The Japanese Yen (JPY) traded within a low of 117.54 and a high of 118.44 versus the dollar, before closing at 117.81 in the New York session. On the data front, the central bank governor of the UAE commented that he did not see the Yen as an attractive currency to diversify its mainly US dollar-denominated fx reserves into.
  

• The Sterling (GBP) traded within a low of 1.8839 and a high of 1.8965, before closing at 1.8938 in the New York session. Looking ahead, M4 money supply is due out tonight.
  

• The Australian Dollar (AUD) traded within a low of 0.7644 and a high of 0.7689, before closing at 0.7688 in the New York session.
  

• Gold (XAU) rose by US80c to US$622.50 an ounce thanks to a weaker greenback.

TECHNICAL COMMENTARY

• Euro 1.2825

Initial support at 1.2761 (Nov 17 low) followed by 1.2746 (Nov 8 low). Initial resistance is now located at 1.2901 (Nov 10 high) followed by 1.2941 (Aug 21 reaction high).

• Yen 117.80

Initial support is located at 117.12 (Nov 13 low) followed by 116.57 (Nov 1 low). Initial resistance is now at 118.61 (Nov 9 corrective high) followed by 119.67 (Oct 24 high).

• Pound – 1.8945

Initial support at 1.8835 (Nov 17 low) followed by 1.877 (61.8% retracement of the 1.8516-1.9182 rally). Initial resistance is now at 1.8972 (Nov 15 high) followed by 1.9052 (Nov 14 high).

• Australian Dollar – 0.7690

Initial support at 0.7642 (Nov 16 low) followed by 0.7614 (Nov 13 corrective low). Initial resistance is now at 0.771 (Nov 9 high &amp 61.8% ret 0.7769 to 0.7614) followed by 0.7769 (Nov 1 high).

• Gold – 623

Initial support at 615.0 (Nov 17 low) followed by 613.4 (Nov 8 low). Initial resistance is now at 629.5 (Nov 17 high) followed by 636.9 (Nov 10 high).