Australian FOREX Weekly Outlook 08/11/2006

08/11/06

last week’s currency trading review

The Dollar was weaker for most of the week as US Core PCE index came in as expected, consumer confidence and Chicago PMI both fell, and the ISM manufacturing was also weaker. This provided weight to the argument for rate cuts in the first quarter of 2007 by the Federal Reserve. However, non-farm payrolls although weaker than expected, enjoyed upward revisions in the previous two results of close to 150k overall which helped the USD regain lost ground throughout the week. The Euro initially rallied against the USD in the week although its HICP estimate came in below forecasts, and the ECB kept rates on hold. Commentary from ECB President Trichet did however signal that further rate hikes were being looked at to curb inflation pressures. The Euro closed the week at 1.2716 having started the week at 1.2728. The Japanese Yen also rallied initially against the USD despite a weaker unemployment number, and the Bank of Japan keeping rates on hold. USD/JPY closed the week at 118.01 having started the week at 117.42. The Sterling closed last week at 1.9009 having started the week at 1.9018 as its mortgage approvals fell slightly than expected. The Aussie closed the week at 0.7699 having started the week at 0.7698 despite retail sales and trade balance coming in much poorer than expected.

The forex trading week preview

In the States markets will be focused on the results of the legislative election which is finalized Wednesday with the market sentiment being bearish if the Democrats were to gain control of the House of Representatives or the Senate, since the market believes that market reforms would be slow to come by. Another key release of interest is the US Trade Balance (Thursday) which is expected to improve as oil imports and prices have dropped in the survey month of September. Also, consumer sentiment (Thursday) will be looked at closely to determine how the drop in gasoline prices for example has impacted the consumer sector and their future spending.

We will provide our previews of these data releases in the daily summary.

In the Eurozone the ECB monthly bulletin (Thursday) will be scrutinized to see how the economic outlook has changed for the ECB since the previous release. An unchanging German CPI is expected (Friday) both on a monthly and yearly basis. With not much other data being released, comments from ECB officials scheduled throughout the week could impact further Euro strength.

We will provide our previews and reviews of these data releases in the daily summary.

Key Weekly Pivot levels

• Euro 1.2780

Initial support at 1.2721 (Nov 7 low) followed by 1.2677 (Oct 31 low). Initial resistance is now located at 1.2834 (Sep 22 high) followed by 1.288 (Aug 31 high).

• Yen 117.65

Initial support is located at 116.97 (Nov 3 low) followed by 116.57 (Nov 1 low). Initial resistance is now at 118.47 (Nov 6 high) followed by 118.74 (Oct 27 high).

• Pound – 1.9060

Initial support at 1.8948 (Nov 6 low) followed by 1.887 (Oct 27 low). Initial resistance is now at 1.9146 (Aug 8 high) followed by 1.9129 (Apr 20, 2005 reaction high).

• Australian Dollar – 0.7725

Initial support at 0.767 (Nov 6 low) followed by 0.7623 (Oct 27 low). Initial resistance is now at 0.7769 (Nov 1 high) followed by 0.7795 (May 11 trend high).

• Gold – 624

Initial support at 614.55 (Nov 2 low) followed by 598.5 (Oct 31 low). Initial resistance is now at 629.8 (Nov 6 high) followed by 640.6 (Sep 6 high).