Australian FOREX Daily Outlook 26/05/2006

MARKET SUMMARY –26MAY06 (05:00GMT)

• The Dollar slipped against the major currencies in the overnight session after the upward revision of Q1 GDP falling short of forecasts. The March quarter GDP came in at 5.3% whereas analysts were expecting 5.8%. US existing home sales fell 2% in April, dropping to 6.76 million from 6.90 million in March. These results plus news that John Snow would leave the US Treasury in June, helped further weaken the dollar before close of in the overnight session. In other markets, the Dow Jones index lifted 94pts and the NASDAQ rose by 29pts. Crude oil price strengthened on Thursday rising to US$71.32, a move of US$1.46. Looking ahead, personal income and spending, and the US core PCE deflator are due out later today. The market is expecting a rise in the core PCE deflator by 2.1% y/y up from 2.0% y/y in March.
  

• The Euro traded in a range of 1.2753 to 1.2819, before closing at 1.2799 in the New York session.
  

• The Japanese yen traded in a range of 111.67 to 112.79 versus the dollar, before closing at 111.77 in the New York session. On the data front, yesterday’s release of the trade balance showed that the trade surplus fell by 31.8% from a year ago. Core CPI figures came in as forecasted 0.5% for the month of April.
  

• The Sterling traded in a range of 1.8666 to 1.8749, before closing at 1.8767 in the New York session. On the data front, the March quarter GDP figure was not revised from its initial estimate of 0.6% for Q1 and 2.2% for the year.
  
• The Aussie traded in a range of 0.7529 to 0.7622, before closing at 0.7613 in the New York session. On the data front, National average house prices increased by 1.0% in the quarter to be 3.6% higher over the year.
  
• Gold moved steadily higher rising US$11.00 TO US$648.50 an ounce.

TECHNICAL COMMENTARY

• Euro 1.2705

Initial support at 1.2730 (May 24 low) followed by 1.2685 (May 11 low). Initial resistance is now located at 1.2894 (May 24 high) followed by 1.292 (May 17 corrective high).

• Yen 111.50

Initial support is located at 111.62 (May 24 low) followed by 110.96 (May 23 corrective low 61.8% retracement of the 108.93 to 113.03). Initial resistance is now at 112.96 (38.2% retracement of the 119.41 to 108.98 decline) followed by 114.18 (May 4 high &amp 50% ret 119.41 to 108.98).

• Pound – 1.8745

Initial support at 1.8633 (May 22 corrective low) followed by 1.8603 (23.6% retracement of the 1.7230 to 1.9027 advance). Initial resistance is now at 1.8889 (May 22 high) followed by 1.8964 (May 19 corrective high).

• Aussie – 0.7605

Initial support at 0.7466 (May 22 low) followed by 0.7405 (50% retracement of the 0.7015 to 0.7795 advance). Initial resistance is now at 0.7596 (May 23 corrective high) followed by 0.7676 (May 18 high).