Australian FOREX Daily Outlook 08/11/2006

US Dollar slides as elections draw to a close. Governor Fukui comments on possible future rate hikes in Japan. Market awaits rate decision from the RBA.

CURRENCY TRADING SUMMARY –8 NOVEMBER 06 (23:30GMT)

• U.S. Dollar Trading (USD) weakened against the majors in the overnight foreign exchange trading session in technical selling ahead of US congressional elections. Market is waiting for results to determine if the Democrats do grab control of the US House of Representatives which analysts say could be USD negative as it may slow reforms. In other markets, the Dow Jones rose by 51pts and the NASDAQ increased by 9pts assisted by positive corporate announcements and broker upgrades. Crude oil dipped by US$1.02 a barrel to US$59.00 as there is mixed feelings amongst OPEC oil members as to whether another production cut is necessary. Looking ahead, a clearer picture of the election result is expected tonight.
  

• The Euro (EUR) traded within a low of 1.2716 and a high of 1.2818, before closing at 1.2771 in the New York session. On the data front, Eurozone retail sales came in at-0.6% compared to a -0.5% estimate.
  

• The Japanese Yen (JPY) traded within a low of 117.27 and a high of 118.30 versus the dollar, before closing at 117.70 in the New York session. Governor Fukui from the Bank of Japan commented that he would act preemptively with regards to rates to offset any imbalances. Looking ahead, leading indices are due out today.
  

• The Sterling (GBP) traded within a low of 1.8973 and a high of 1.9121, before closing at 1.9054 in the New York session.
  

• The Australian Dollar (AUD) traded within a low of 0.7705 and a high of 0.7760, before closing at 0.7744 in the New York session. On the data front, the RBA decided to increase interest rates by 25 basis points to 6.25%. Commentary afterwards noted the effects of the drought however it would not affect the medium term policy outlook. In the Melbourne Cup yesterday, first and second place was taken by international horses from Japan with Delta Blues taking first place, Pop Rock finishing a close second, and further back was Maybe Better. Estimates had centered on Tawqeet which finished behind the field. Looking ahead, unemployment is due out tomorrow.
  

• Gold (XAU) fell by US20c to US$627.70 an ounce on the back of weaker oil prices.

TECHNICAL COMMENTARY

• 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).