Australian FOREX Daily Outlook 27/02/2006

MARKET SUMMARY –27FEB06 (05:00GMT)

• The Dollar was generally stronger against the major currencies on Friday night despite weaker than expected US durable good orders. US durable goods fell by 10.2% in January, driven by a sharp fall in aircraft orders. The market was expecting a 1% fall in durable goods.The dollar briefly weakened around 10 – 15 points on the headline, but upon further inspection the data didn’t look so bad, and this saw dollar quickly back to where it had started. In other markets, US shares were mixed with the Dow Jones down 7pts while the NASDAQ was up 8pts. Crude oil prices lifted by 3.9% on Friday in reaction to a suicide bomb attack on the Abqaiq oil facility in Saudi Arabia. Crude oil rose by US$2.37 to US$62.91 a barrel. Looking ahead and new home sales will be released later today in the States.

• The Euro traded down from 1.1930 to a low of 1.1863, before closing at 1.1875 in the New York session. In the Eurozone on Friday, Germany’s inflation rate was unchanged in February. It stayed at 2.1%pa just slightly above the general expectation by analysts for a 2%pa rate.

• The Japanese yen traded in a range of 116.55 to 117.12, before closing at 116.90 in the New York session. In Japan today, the Japanese yen strengthened further against the dollar as the Nikkei ran with a story that government ministers are increasingly suggesting that they will endorse the BOJ’s termination of quantitative easing policy.

• The Sterling traded in a range of 1.7428 to 1.7537, before closing at 1.7460 in the New York session. In the UK on Friday, there were comments from the BoE MPC member Bean to the effect that UK rates could stay on hold at 4.5% for the next 6 months. Bean indicated that retail activity, usually the most significant contributor to GDP growth, was showing signs of improving. On the data front, there was a slight upward revision to GDP from 0.5% to 0.6%.Beans comments and the GDP figures helped GBP move higher and virtually removed the market’s pricing of UK rate cut later this year from the yield curve.

• The Aussie traded in a narrow range of 0.7389 to .7415, before closing at 0.7395 in the New York session. The New Zealand dollar fell sharply towards 17-month lows in Asia today after worse-than-expected trade data fuelled selling of a currency already hurt by prospects of slowing growth and lower interest rates. The kiwi dropped as low as $0.6571 after data showed New Zealand’s trade deficit grew to NZ$935 million in January, more than double the shortfall of NZ$400 million forecast by economists.

• Gold prices soared on Friday in reaction to the attack on a Saudi oil installation. Gold rose by US$10.30 to US$561.20 an ounce.

TECHNICAL COMMENTARY

• Euro 1.1860

Initial support at 1.1848 (Feb 16 low) followed by 1.1800 (76.4% retracement of the 1.1638 to 1.2324 advance). Initial resistance is now located at 1.1935 (Feb 24 high) followed by 1.1976 (Feb 20 high).

• Yen 116.20

Initial support is located at 115.70 (61.8%% retracement of the 113.41 to 119.41 advance) followed by 114.14 (Jan 23 low). Initial resistance is now at 117.17 (Feb 24 high) followed by 118.54(Feb 23 high).

• Pound – 1.7435

Initial support at 1.7414 (Feb 23 low) followed by 1.7375 (Feb 22 low). Initial resistance is now at 1.7556 (Feb 24 high) followed by 1.7577 (Feb 10 high).

• Aussie – 0.7385

Initial support at 0.7343 (Feb 22 low) followed by 0.7317 (Feb 17 low). Initial resistance at 0.7424 (Feb 23 high) followed by 0.7444 (Feb 15 high).