Australian FOREX Daily Outlook 20/12/2006

Dollar slides against majors despite strong data. German Ifo comes in at 15-year highs. BoJ keep rates steady at 0.25%

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

• U.S. Dollar Trading (USD) was weaker against the majors in the overnight forex trading session as PPI and housing starts were much stronger than expected, however, stronger IFO business sentiment from the Eurozone was the catalyst for USD weakness. PPI for the month of November came in at 2% compared to 0.5% and core PPI came in at a strong 1.3% compared to a 0.2% estimate. Housing starts came in at 1.588mln compared to a 1.53mln forecast. In other markets, the Dow Jones index climbed 30pts and the NASDAQ dropped 6 pts as investors digested news from the central bank in Thailand that they were putting in restrictions to stop speculation against the Thai Baht. This prompted a 14.8% fall in the Thai share market which recovered in late trade after it was announced that equity markets would not be affected by new measures. Crude oil rose by US74c to US$62.95 a barrel.

• The Euro (EUR) traded within a low of 1.3085 and a high of 1.3202, before closing at 1.3191 in the New York session. On the data front, German Ifo business sentiment came in at 108.7 compared to 106.8 for December.

• The Japanese Yen (JPY) traded within a low of 117.83 and a high of 118.30 versus the dollar, before closing at 118.06 in the New York session. On the data front, the BoJ kept interest rates on hold at 0.25%. BoJ Governor Toshi Fukui had warned that domestic consumption and consumer price gains had softened.

• The Sterling (GBP) traded within a low of 1.9467 and a high of 1.9674, before closing at 1.9680 in the New York session. Looking ahead, the BoE MPC minutes are due out today.

• The Australian Dollar (AUD) traded within a low of 0.7799 and a high of 0.7852, before closing at 0.7842 in the New York session.

• Gold (XAU) strengthened by US7.60 to US$625.50 an ounce stemming from a softer greenback, stronger oil, and volatility in Thailand markets.

TECHNICAL COMMENTARY

• Euro 1.3210

Initial support at 1.3052 (Dec 18 low) followed by 1.303 (38.2% retracement of the 1.2483 to 1.3368 advance). Initial resistance is now located at 1.3217 (Dec 19 high) followed by 1.3254 (Dec 14 high).

• Yen 118.05

Initial support is located at 117.26 (Dec 14 low) followed by 116.65 (Dec 13 low). Initial resistance is now at 118.61 (Nov 9 high &amp 76.4% ret 119.90 to 114.43) followed by 119.67 (Oct 24 corrective high).

• Pound – 1.9700

Initial support at 1.9434 (Dec 18 low and Nov 29 reaction low) followed by 1.9342 (50% retracement of the 1.8835 to 1.9849 advance). Initial resistance is now at 1.9703 (Dec 19 high) followed by 1.973 (Dec 13 corrective high).

• Australian Dollar – 0.7845

Initial support at 0.7774 (50% retracement of the 0.7614 to 0.7933 advance) followed by 0.7769 (Former resistance from Nov 1). Initial resistance is now at 0.7855 (Dec 19 high) followed by 0.7897 (Dec 13 corrective high).

• Gold – 623

Initial support at 612.07 (Dec 18 low) followed by 602.4 (Oct 20 high). Initial resistance is now at 629.1 (Dec 15 high) followed by 638.1 (Dec 8 high).