Australian FOREX Daily Oulook 26/07/2005

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26/07/05 (05:00 GMT)

FOREX – Australian Dollar Market Summary

• Dollar remained a bit directionless but well bid at the same time with sentiment still in its corner and data outcomes eyed for further direction. Going by the ‘bird in hand is better than two in the bush’ theory, traders have decided to focus on the current cyclical strength of the U.S. economy rather than second guess the next move from China. Also comments from the Chinese side suggest that the door has been shut for further revaluation in the near future. Earlier, data showed that the U.S. housing market remains on a strong footing with existing home sales inching higher and recording its fastest price appreciation in the last 25 years.

• Euro continues to project strong resilience in remaining above 1.20 but is vulnerable for further losses. Supporting it was the higher than expected inflation outcome in two key German states due to high import costs of oil, while today’s important IFO surveys are also expected to supportive on the combination of a weaker Euro boosting exports as well as the improvement in global demand led by the U.S. which raises hopes for an improvement in the export dependant Euro-Zone economy.
  

• Yen slipped back a bit but remained within the 111 region as the Yuan effect has faded away for now. Earlier nationwide department sales rose more than expected largely due to seasonal factors but overall the direction of consumer spending remains a bit mixed. Bank of Japan begin their monetary policy meeting today with the zero interest rate policy set to be maintained, the reserve target is eyed by the market after two members voted for it to be reduced in the last meeting. They remain optimistic on the overall outlook for the economy but recent decline in exports is a cause for concern.
  

• Pound managed to rebound after hovering around its lowest level in nearly two years with the lack of any market moving events leading to range trading. It has inched back above 1.74 but sell on rallies remains as the market’s favoured strategy. Hometrack house prices continued to project a decline but it is hoped that a rate cut could bring back buyer’s confidence. Today’s CBI Industrial trends survey is eyed to check if the manufacturing sector is improving but it’s likely to point towards another decline.
  

• Australian Dollar slipped back below 0.76 as in spite of the obvious positives for the Aussie due to the Yuan revaluation, for now the U.S. growth outlook is comparatively better. Australia’s Business confidence index dropped to a four year low on concerns of a declining housing market and slow consumer spending. Earlier PPI came in line with expectations while tomorrow’s consumer inflation should inch higher as well due to high oil prices. The Aussie should continue to struggle to break past 0.77 but clearer direction is awaited.

EUR/USD – Yesterday’s low was 1.2027 and high was 1.2086.
The pair closed at 1.2045.

The pair has retraced all its gains post Yuan revaluation with the crucial 1.2250-1.23 remaining a sell region. Decent buying interest and support lies around 1.20 with a decisive break below likely to accelerate losses towards the 1.1930-45 support region. Bottom picking buying interest is seen around 1.19 with a decisive break below could accelerate its losses which should bring into focus the crucial pivot support zone of 1.1850-75. The Euro has managed to make an impressive recovery from this level in the past and a break below would send it towards its lowest level in 2 years and would accelerate its losses with distant support around 1.1755. On the upside, 1.2145 holds immediate resistance with the 1.2145-1.2250 region holds mixed technical interest.

Key resistance is seen at 1.2155 followed by 1.2245 while support starts at 1.1990 followed by 1.1875.

USD/JPY – Yesterday’s low was 111.28 and high was 111.97.
The pair closed at 111.59.

Yen has pared back half of its gains after the Yuan story was digested and has stabilized within the 111 region for now with decent dollar buying interest in 110.70-85 region with the break below likely to bring into focus the very strong support zone at 109.75-90. Resistance has now moved down to 112.25-40 zone with any break above likely to lead to mild selling interest but further news from China is watched out for. A break above 113 could shift the momentum back in the dollars favour; as data from both sides is eyed for further direction.

Key Resistance is seen at 112.40 followed by 113.25 while support starts at 110.75 followed by 109.80.

GBP/USD – Yesterday’s low was 1.7331 and high was 1.7471.
The pair closed at 1.7435.

This pair remains in deep negative territory and is failing to reverse its losses with immediate support seen in the 1.7330-55 region with decent bottom picking buying interest around 1.73 with a break below likely to accelerate its losses and distant support is seen in the 1.7230-50 region. On the upside, mild resistance lies in the 1.7475-90 zone with a break above bringing into focus the 1.7555 strong resistance mark with decent selling interest above it. Only a break above 1.76 would shift intra day sentiment in the Pounds favour, otherwise it remains vulnerable for further losses.

Key Resistance is seen at 1.7495 followed by 1.7555 while support starts at 1.7345 followed by 1.7295.

AUD/USD – Yesterday’s low was 0.7588 and high was 0.7645.
The pair closed at 0.7615.

The Australian Dollar in spite of its impressive rally would struggle to break decisively deep into the 0.77 region with strong selling orders intensifying within the 0.7750-0.78 region. For now resistance exists in the 0.7650-75 resistance zone with only a break above to shift intra day momentum in its favour. Support has moved up to the previous strong resistance region of 0.7555-70 with buying interest continuing to remain firm on dips below that region. Cue is taken from other majors.

Key Resistance is seen at 0.7655 followed by 0.7715 while support starts at 0.7545. followed by 0.7510.

Kunal Sharma

Easy Forex Pty Ltd. (Australia)
E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

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