Australian FOREX Weekly Outlook 11/04/2006

11/04/06

last week’s recap

The Euro closed last week at 1.2100 having started the week at 1.2117. USD/JPY closed last week at 118.26 having started the week at 117.68. The GBP closed last week at 1.7435 having started the week at 1.7373. The AUD closed last week at 0.7318 having started the week at 0.7163.

The Dollar was mixed versus the major currencies in a fairly volatile week in the currency markets. Friday’s stronger than expected non-farm payrolls figure, saw the US dollar gain ground against most of the major currencies, closing the week at highs around 1.21 versus the Euro and 118 against the Yen. The Euro ended the week close to where it opened, dropping more than US 2 cents in the two days coming into the weekend. Friday’s late sell-off retracing most of the week’s earlier gains. Selling in the single currency was triggered by a combination of dovish comments from ECB President Trichet dampening expectations of an early rate rise and the better than expected US payrolls report. The Yen also finished the week on the defensive trading around 118.00. The Sterling also weakened against the US dollar on Friday night.The Bank of England held monetary policy unchanged for the eighth consecutive month at 4.50% . The Australian dollar closed the local trading week stronger having staged a solid recovery above the 0.7300 level following a lower than expected February trade gap and talk of another 0.25% rate hike by the RBA later in the year after stronger than expected economic data.

The week ahead

The key releases for this week will be US retail sales and the German ZEW survey for the Eurozone. The trend in US retail sales has been difficult to estimate recently. The market expects a rebound in sales in March after a weak February, although the seasonal adjustment process makes forecasts especially uncertain. In the Eurozone, the ZEW survey is expected to see a catch up.

In the States the trend in US retail sales has been difficult to assess recently, having been buffeted by the weather and by sharp variations in car sales. So after jumping by 2.9% on the month in January, sales dropped by 1.5% in February. The March data (Thursday) is expected to rebound slightly. An update on the mind-set of the consumer in the States will come from the University of Michigan’s take on consumer sentiment (Thursday). Industrial production in the US (Friday) is forecast to have rebounded in March, having been unchanged in February. Finally in the US, keep an eye out for the trade balance (Wednesday). This is expected to have shown a very modest improvement in February. We will provide our previews of these data releases in the daily summary.

In the Eurozone the highest profile release is expected to be the German survey for April (Tuesday). The market expects a slight rebound in the result of the survey. German industrial production data was delayed by the regional strike and is not scheduled to appear for another couple of weeks. However, the coming week will see industrial production out of Italy (Wednesday).In the UK the labour market report (Wednesday) is expected to show that the level of unemployment has continued to rise. The deterioration in the trade balance (Tuesday) has been uncomfortable and the trend appears to have worsened over the past few months. We will provide our previews and reviews of these data releases in the daily summary.

In Japan the highlight of the week will most likely be the Minutes of the March 9 BoJ Monetary Policy Board meeting (Friday). This was the meeting that switched the target for the operation of monetary policy away from quantitative easing to the overnight interest rate. We will provide our previews of these data releases in the daily summary.

Key Weekly Pivot levels

• Euro 1.2115

Initial support at 1.2075 (Apr 10 low) followed by 1.2031 (Apr 3 reaction low). Initial resistance is now located at 1.2235 (Apr 7 high) followed by 1.2335 (Apr 6 high).

• Yen 118.40

Initial support is located at 117.26 (Apr 6 low) followed by 116.68 (Apr 5 low). Initial resistance is now at 118.71 (Apr 10 high) followed by 118.82 (Apr 3 high).

• Pound – 1.7440

Initial support at 1.7375 (Apr 10 low) followed by 1.7337 (76.4% retracement of the 1.7250 to 1.7619 advance). Initial resistance is now at 1.7535 (Apr 7 high) followed by 1.7626 (Mar 6 reaction high).

• Aussie – 0.7310

Initial support at 0.7255 (Apr 10 low) followed by 0.7196 (Apr 5 low). Initial resistance is now at 0.7345 (Apr 7 high) followed by 0.7370 (61.8% retracement of the 0.7590 to 0.7015 decline).