Australian FOREX Daily Oulook 28/07/2005

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28/07/05 (05:00 GMT)

• Dollar, in spite of yet another day of robust data, gave back its gains on the combination of its failure to break key barriers on most majors and the market looking to adopt a neutral position ahead of tomorrow’s key U.S. GDP and consumption results. Earlier Durable Goods orders came in higher than expectations reaffirming the solid growth outlook of the economy with previous month’s figures revised higher. This was also confirmed in the Beige Book results with a general optimism for the economy growing. Another unexpected positive for the Greenback came from the record rise in new home sales which was seen across the nation.

• Euro regained its footing back over the 1.20 mark as apart from the market’s assertion to take profits on Dollar longs, the recent solid data from the Euro-Zone also played its part in providing a degree of confidence to Euro bulls as well as good real money demand. Finally there was some positive news from regions besides Germany and France with the Italian business confidence inching higher. Another boost for the Euro came from the now usual leak in German data results, with the employment figures coming in much better than expected and this result has come at the right time for Chancellor Schroeder with elections around the corner in September.

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• Yen like other majors managed to reverse some of its losses but it is likely to remain range bound within the technically mixed interest region of 112 till key Japanese data is released tomorrow. This mornings Retail Sales data had another positive reading which gives credence to the theory of a steady pick up in domestic consumer demand, which is very important for the economy in the current environment where global demand for exports has declined. Also pick up in the U.S. demand augurs well for a steady rise in exports this should translate into the subsiding of deflationary conditions and raise hopes of a rate hike from the stubborn BoJ.

• Pound got an unexpected boost from the BBA mortgage lending figures coming in at their highest level in a year. However this result is more likely a mirage than a sign of solid growth for the economy. Housing market is definitely showing signs of stabilization and not freefalling, which is what one would expect from a responsible economy like the U.K., but trend is towards the downside with today’s house price reading eyed. Any foray above 1.75 continues to be a sell region.

• Australian Dollar is hovering within the 0.75 region awaiting some clear breaks on other majors to take its direction but it is likely to be locked within the 0.75 region till key U.S. data is released. New Zealand left its interest rates unchanged at 6.75% as Reserve Bank Gov Bollard was a bit hawkish stating that inflationary pressures may inch higher than its target while borrowing cost could also increase but it is a case of wait and watch. And like the Euro, the Kiwi Dollar needs to depreciate to propel its exports.

EUR/USD – Yesterday’s low was 1.1964 and high was 1.2083.
The pair closed at 1.2068.

The pair in spite of its impressive rebound would struggle to appreciate further with immediate resistance seen around the 1.2110-25 region with decent selling interest on any break above 1.21. A decisive break above brings into focus the technically mixed region of 1.2145-1.2225 into focus with patchy moves likely within it. Above that region lies the very strong resistance zone of 1.2255-1.23 with the region laced with strong offers. 1.23 is the pivot mark and a decisive break into this region would shift the momentum in the Euro’s favour. On the downside, bottom picking interest and mild support remains on dips towards 1.1975-90 but a break below will accelerate its losses with decent buying interest around the 1.19 mark. A decisive break below this mark will lead to moves towards the crucial pivot region 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

Key resistance is seen at 1.2125 followed by 1.2245 while support starts at 1.1970 followed by 1.1875.

USD/JPY – Yesterday’s low was 112.12 and high was 112.78.
The pair closed at 112.24.

The Yen managed to retrace some of its losses with the pair in semi neutral territory but the tilt towards further Dollar gains. Immediate support and decent buying interest is seen in the 111.55-70 zone with any moves towards 111 or brief dips below that mark should lead to strong Dollar buying interest. Only a clear break below that mark would shift the momentum back in the Yen’s favour. 112 region has mixed technical interest with decent resistance in the 112.90-113.10 region with selling interest around it. A decisive break above 113 would shift the sentiment back in the dollar’s favour and make it very hard for the Yen to reverse its losses.

Key Resistance is seen at 112.85 followed by 113.25 while support starts at 111.55 followed by 111.10.

GBP/USD – Yesterday’s low was 1.7335 and high was 1.7471.
The pair closed at 1.7435.

This pair in spite of its rebound remains in negative territory and vulnerable for further losses with support seen in the 1.7340-55 zone and decent bottom picking buying interest around 1.73 with a break below likely to accelerate its losses. On the upside resistance remains solid in the 1.7475-90 zone with a break above to bring into the focus the very strong resistance mark of 1.7555 above which selling interest intensifies. 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 1.7475 followed by 1.7555 while support starts at 1.7340 followed by 1.7295.

AUD/USD – Yesterday’s low was 0.7528 and high was 0.7595.
The pair closed at 0.7573.

The Australian Dollar has remained within the 0.75 region taking cue from other majors with mixed technical interest within this region. Immediate support and buying interest lies in the 0.7505-20 zone with a break below bringing the strong support mark of 0.7475 into focus. On the upside resistance has moved down to the 0.7595-0.7610 zone with very strong resistance and selling interest around 0.7655. Only a break above 0.77 shifts the momentum in the Aussie’s favour while it is likely to remain range bound within the 0.75 region.

Key Resistance is seen at 0.7595 followed by 0.7655 while support starts at 0.7510 followed by 0.7470.

Kunal Sharma

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

Australian Financial Services License 246566

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