Australian FOREX Daily Outlook 31/10/2006

Core PCE deflator result as expected. US Personal incomes rise. Major currencies caught in tight range trading.

CURRENCY TRADING SUMMARY –31 OCTOBER 06 (01:30GMT)

• U.S. Dollar Trading (USD) was generally mixed in tight range trading against the majors in the overnight foreign exchange trading session as data released from the US was interpreted as positive USD. The Core PCE index came in at 0.2% for the month of September as expected. Personal income rose to 0.5% from a 0.3% estimate. Richmond Federal Reserve President Jeffrey Lacker commented that the US economy was able to withstand further policy tightening. Lacker was the only member to vote for rate hikes in the last two Federal Reserve meetings. In other markets, both the Dow Jones index and the NASDAQ rose by 18pts. Crude oil fell by US$2.34 a barrel to US$58.41 as refiners are yet to receive notice of production cuts from OPEC oil producers. Looking ahead, US consumer confidence and Chicago PMI are due out tonight.
  

• The Euro (EUR) traded within a low of 1.2699 and a high of 1.2740, before closing at 1.2728 in the New York session. Looking ahead, the unemployment rate and HICP flash estimate are due out today.
  

• The Japanese Yen (JPY) traded within a low of 117.20 and a high of 117.62 versus the dollar, before closing at 117.42 in the New York session. On the data front, unemployment came out at 4.2%, higher than the expected 4.1%. Looking ahead, BoJ interest rate announcement is due out today.
  

• The Sterling (GBP) traded within a low of 1.8957 and a high of 1.9043, before closing at 1.9018 in the New York session. On the data front, mortgage lending data came in at 8.9bln GBP compared to an estimated 9bln GBP, and higher than the previous result of 8.8bln GBP.
  

• The Australian Dollar (AUD) traded within a low of 0.7676 and a high of 0.7702, before closing at 0.7698 in the New York session.
  

• Gold (XAU) rose by US$6.40 to US$607.40 an ounce as the greenback weakened and gold broke a key resistance level.

TECHNICAL COMMENTARY

• Euro 1.2715

Initial support at 1.2662 (Oct 27 low) followed by 1.2597 (Oct 26 low). Initial resistance is now located at 1.2751 (76.4% retracement of the 1.2834 to 1.2483 decline) followed by 1.2769 (Oct 3).

• Yen 117.60

Initial support is located at 116.97 (76.4% retracement of the 116.06 to 119.90 advance) followed by 116.06 (Sep 22 low). Initial resistance is now at 118.74 (Oct 27 high) followed by 119.67 (Oct 24 high).

• Pound – 1.8990

Initial support at 1.8952 (Oct 30 low) followed by 1.887 (Oct 27 low). Initial resistance is now at 1.9076 (Sep 25 high) followed by 1.9094 (Aug 31 high).

• Australian Dollar – 0.7690

Initial support at 0.7623 (Oct 27 low) followed by 0.7559 (Oct 24 low). Initial resistance is now at 0.7722 (Sep 4 high) followed by 0.7795 (May 11 trend high).

• Gold – 604

Initial support at 590.45 (Oct 26 low) followed by 580.05 (Oct 25 low). Initial resistance is now at 611.16 (Sep 30 high) followed by 619.4 (Sep 8 high).