Australian FOREX Daily Outlook 05/10/2006

The US Dollar retreats slightly against other major currencies as data released came in on the soft side. Focus on Bernanke comments.

CURRENCY TRADING SUMMARY –  4 OCTOBER 06 (01:30GMT)
                                                                     

• U.S. Dollar Trading (USD) weakened against the majors in the overnight forex session as both the ADP employment survey and the US ISM non-manufacturing index came in below expectations. Although the greenback was initially stronger, it lost momentum when the ADP payroll survey came in at 78k compared to a 110k estimate, and the ISM non-manufacturing index came in at 52.9 compared to an expected level of 56. Federal Reserve Chairman Bernanke commented that there was in effect a substantial correction in the housing sector which would affect economic growth for the second half of 2006. In other markets, the Dow Jones index soared 123pts while the NASDAQ climbed 47pts as the market took the comments by Bernanke as a possible sign of early rate cutting by the Federal Reserve. Crude oil rose by US73c to finish at US$59.41 a barrel after hitting 8-month lows, however, violence in Nigeria caused a turn around in the price. Looking ahead, initial jobless claims are due out tonight.
  
• The Euro (EUR) traded within a low of 1.2671 and a high of 1.2738, before closing at 1.2715 in the New York session. On the data front, PMI services came in at 56.7 compared to an expected 57 level. Looking ahead, the ECB announces their interest rate decision today.
  
• The Japanese Yen (JPY) traded within a low of 117.86 and a high of 118.27 versus the dollar, before closing at 117.90 in the New York session.  
• The Sterling (GBP) traded within a low of 1.8790 and a high of 1.8884, before closing at 1.8865 in the New York session. On the data front, PMI services for the UK came in as expected at 54.4 for September, a rise from previous result of 54.3 in August. Looking ahead, the Bank of England announce their interest rate decision today.
  
• The Australian Dollar (AUD) traded within a low of 0.7417 and a high of 0.7462, before closing at 0.7459 in the New York session.
  
• Gold (XAU) fell by US$14.80 to US$566.70 an ounce on the back of the sell-off in the base metal market with both copper and aluminium falling more than 3pct.           

TECHNICAL COMMENTARY

• Euro 1.2715

Initial support at 1.2639 (Sep 29 reaction low) followed by 1.263 (Sep 15 reaction low). Initial resistance is now located at 1.2769 (Oct 3 high) followed by 1.2834 (Sep 22 reaction high).

• Yen 117.80

Initial support is located at 117.32 (Sep 29 low) followed by 116.89 (Sep 27 low). Initial resistance is now at 118.41 (Oct 2 high) followed by 118.56 (Multi-year key trend line / triangle resistance).

• Pound – 1.8860

Initial support at 1.8633 (Sep 29 low) followed by 1.8601 (Sep 11 low). Initial resistance is now at 1.8907 (61.8% retracement of the 1.9076 to 1.8633 decline) followed by 1.8919 (Sep 28 high).

• Australian Dollar – 0.7455

Initial support at 0.7417 (Oct 4 low) followed by 0.7405 (Jul 17 low). Initial resistance is now at 0.7495 (Oct 2 high) followed by 0.7557 (Sep 26 high).

• Gold – 567

Initial support at 561.1 (Oct 4 low) followed by 554.4 (Jun 15 low). Initial resistance is now at 580.96 (Oct 4 high) followed by 598.25 (Oct 3 high).