Australian FOREX Weekly Outlook 20/09/2006

20/09/06

last week’s currency trading review

The Dollar was mixed against the major currencies in a week that had data releases come out pretty much on expectations. Comments by Fed officials indicated that the market should not rule out further rate hikes supported the dollar. A record US trade balance also failed to weaken the dollar. The Euro closed last week at 1.2642 having started the week at 1.2675. The Japanese yen weakened versus the dollar as speculation increased that Japanese interest rates were unlikely to rise again this year. USD/JPY closed last week at 117.60 having started the week at 116.86. The Sterling rallied against the dollar and other major currencies following robust retail sales and employment figures added weight to speculation that the BoE will raise interest rates sooner rather than later. The Sterling closed last week at 1.8776 having started the week at 1.8659. The Aussie dollar was marginally weaker against the dollar on the back of lower commodity prices. The Aussie closed last week at 0.7544 having started the week at 0.7569.

The forex trading week preview

The most significant event this week will be the FOMC rate decision. Although this time round these is a high degree of certainty that no change in the Fed funds rate is pending. The market will pay close attention to whether there are any changes in the language of the statement following softer that expected data of late. In the Eurozone, the highlight could be early indications of a large decline in German inflation.

In the States the result of Wednesday’s FOMC meeting is confidently expected to be another ‘no-change’ decision. The post-meeting statement is expected to reiterate the same reassuring anti-inflation language. In regards to forward-looking indicators the leading indicator is due out Thursday. The Philly Fed Index (Thursday) is expected to come in slightly lower than the previous month. We will provide our previews of these data releases in the daily summary.

In the Eurozone the data calendar is a light one. The Belgian leading indicator (Friday) is expected to show a small downward consolidation in the September update. Friday brings the German regional inflation reports for September. The drop in energy prices contrasts with the rises seen this time a year ago and therefore the impact on the annual rate could be quite prominent. Analysts expect to take about 0.5% off the annual rate. In the UK the main interest will be in the Minutes of the September MPC meeting (Wednesday). We will provide our previews and reviews of these data releases in the daily summary.

In Japan the data calendar is a light one, with the only major release to watch being the August trade balance (Thursday), which over the past few months has shown signs of being on an improving trend. We will provide our previews and reviews of these data releases in the daily summary.

Key Weekly Pivot levels

• Euro 1.2715

Initial support at 1.263 (Sep 15 low) followed by 1.257 (76.4% retracement of the 1.2456 to 1.2941 advance). Initial resistance is now located at 1.2755 (Sep 14 high) followed by 1.2836 (Sep 6 high).

• Yen 117.90

Initial support is located at 116.99 (Sep 19 low) followed by 116.6 (Sep 11 low). Initial resistance is now at 118.3 (Sep 18 high) followed by 118.9 (Apr 11 reaction high).

• Pound – 1.8810

Initial support at 1.8734 (Sep 18 low) followed by 1.8601 (Sep 11 low). Initial resistance is now at 1.892 (Sep 14 high) followed by 1.8978 (76.4% retracement of the 1.9094 to 1.8601 decline).

• Australian Dollar – 0.7550

Initial support at 0.7482 (Sep 13 low) followed by 0.7442 (61.8% retracement of the 0.7269 to 0.7722 rally). Initial resistance is now at 0.7576 (Sep 19 high) followed by 0.7601 (Sep 8 high and 50% ret 0.7722 to 0.7482 decline).

• Gold – 587

Initial support at 571 (Sep 15 low) followed by 561.0 (Jun 20 low). Initial resistance is now at 595.35 (Sep 14 high) followed by 599.9 (Sep 12 high).