Australian FOREX Daily Outlook 22/03/2006

MARKET SUMMARY –22MAR06 (05:00GMT)

• The Dollar was stronger versus the major currencies overnight due to stronger than expected US economic data. US headline producer prices fell 1.4% in February the market was expecting a .2% decline. The large fall was due to plunging food and energy costs. However, the core PPI (excluding food and energy) rose 0.3%, above the markets expectation of a 0.1% rise. In other markets, US shares fell overnight as Treasury yields rose sharply in response to the higher than expected core PPI. The Dow Jones closed down 39pts with the NASDAQ down 20pts. Crude oil prices rose slightly overnight due to short-covering by investors ahead of weekly inventory data. Crude oil rose by US$0.15c a barrel to US$60.57 a barrel.

• The Euro traded down from 1.2166 to a low of 1.2076, before closing at 1.2095 in the New York session. On the data front, French February consumer spending was reported up 1.8% m/m, much firmer than the +0.3% consensus and the strongest month since October 2004. The strength may help sooth concerns associated with a potential general strike protesting France’s labor law reform.
  
• The Japanese yen traded in a range of 116.24 to 117.25 versus the dollar, before closing at 117.15 in the New York session.

• The Sterling traded in a range of 1.7450 to 1.7560, before closing at 1.7475 in the New York session. On the data front, UK February CPI met expectations, with the y/y rate rising back to the 2.0% MPC target. However, the core CPI accelerated to a 1.4% rate, in contrast to expectations for a steady 1.3%.
  

• The Aussie traded in a range of 0.7148 to 0.7198, before closing at 0.7165 in the New York session.

Initial support at 0.7147 (Mar 21 low) followed by 0.7060 (76.4% retracement of the 0.6773 to 0.7990 advance). Initial resistance at 0.7220 (Mar 21 high) followed by 0.7285 (Mar 20 high).