Australian FOREX Daily Oulook 29/07/2005

29/07/05 (04:00 GMT)

• Dollar slipped across the board as the market continued to take profits on the anticipation of a slightly weaker Q2 GDP outcome and decline in consumption. However the economy has shifted gear and gathered pace in the 3^rd quarter and businesses are much more accustomed to high oil prices now, than they were in Q2. Nonetheless this fits in well with the market’s plan to play the ranges and technical factors drove the majors. Earlier Jobless claims remained around its low levels while Help wanted index edged higher, this augurs well for a robust Payrolls outcome next week. But also weighing against the Greenback is the market’s fear of a sudden statement or action emerging from China, in spite of their denials not many are taking their word for it.

• Euro managed to break and close above the 1.21 mark as profit taking on Dollar longs was complimented by strong data from the zone, the recent signs of improvement from the zone have been an unexpected pleasant surprise for most and the Euro has been duly supported. German unemployment rate inched lower as the rise in exports has increased Biz confidence which translates to more hiring. Money supply from the zone inched higher as well as rise in PPI maintains inflationary pressures. These figures overshadowed potentially bearish comments for the Euro from Italian Prime Minister Berlusconi as he called the Euro a “disaster” and a “rip-off” for consumers. For now, 1.2250-1.23 remains as the strong resistance zone to beat.

• Yen’s gains from Dollar’s general slide were tempered and remained locked within the 112 region as in spite of set of positive data; political concerns plaguing Koizumi’s government added a negative tone. After yesterday’s solid result in the Retail Sales, this morning’s Industrial Production had a strong rebound while unemployment rate fell to a seven year low, however the mixed trend of results continued with a drop in household spending and tame inflation figures. Nonetheless there has been a definite pick up in exports largely thanks to the demand from the U.S.

• Pound made an impressive rebound and rallied by around 200 points but still within its range of the last two weeks as it is prone to exaggeratory movements. Lending support to the Pound was the Nationwide House price survey which recorded a slight rise and dispelled fears of a freefall crash in the market. Also like the Euro-zone, improvement is expected in U.K. exports which should infuse some life in the beleaguered manufacturing sector and lead BoE to remain on hold after one or two rate cuts. For now, only a decisive break above 1.76 could shift momentum in its favour otherwise it should stay range bound.

• Australian Dollar taking cue from other majors has made an impressive move back towards 0.76 with the rise in commodity prices lending it solid support. There is definite improvement seen in the global economy which boosts chances of an increase in Aussie exports. Nonetheless it has strong offers between the 0.7650-0.77 region and only a clear break above it reinforces further uptrend.

EUR/USD – Yesterday’s low was 1.2035 and high was 1.2148.
The pair closed at 1.2127.

The pair after holding steady above 1.20 pushed higher as downside seems well protected for now. Mild resistance around 1.21 has been broken with immediate resistance seen around 1.2155, a clear break above leads to the technically mixed interest region of 1.2155-1.2240 with patchy volatile moves likely within it. Above that region lies the very strong resistance region of 1.2250-1.23 with strong offers laced within it. 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 strong support as moved up to 1.20 with decent bottom picking bid interest around that mark. A clear break below brings the 1.1930-45 support level and any moves lower could accelerate the pair’s losses.

Key resistance is seen at 1.2175 followed by 1.2295 while support starts at 1.2020 followed by 1.1945.

USD/JPY – Yesterday’s low was 111.96 and high was 112.85.
The pair closed at 112.26.

The Yen gained further but is still within the 112 region with the pair in neutral territory, and the Dollar has mild bid interest on any foray below 112. Support is strong in the 111.40-55 zone with decent Dollar bid interest while a break below that region brings into focus the support around 111 and only a break below will shift the momentum in the Yen’s favour. On the upside resistance lies around 112.80-95 with decent selling orders in the 113 region with only a break above 113.55 would make it hard for the Yen to reverse its losses.

Key Resistance is seen at 112.85 followed by 113.45 while support starts at 111.55 followed by 110.90.

GBP/USD – Yesterday’s low was 1.7403 and high was 1.7595.
The pair closed at 1.7546.

The pair is now the upper end of its recent range but selling orders remain strong above 1.76 with offers laced up to the 1.77 mark, this is a pivot mark and only a break above it reinforces hopes of a rally by the Pound otherwise it remains vulnerable for losses. On the downside support has moved up to previous resistance mark of 1.7475 with decent bottom picking bid interest on dips below 1.74. Another clear break into the 1.73 region would make it hard for the Pound to reverse its losses.

Key Resistance is seen at 1.7605 followed by 1.7675 while support starts at 1.7475 followed by 1.7395.

AUD/USD – Yesterday’s low was 0.7537 and high was 0.7606.
The pair closed at 0.7585.

The Australian Dollar has failed to break above the mild resistance mark of 0.7610 but is close to it, a break above would lead to the strong resistance mark of 0.7655 with strong offers laced up to 0.77. Only a break above this mark to renew hopes of a fresh uptrend otherwise it is likely to stay range bound. Decent support has moved up to the 0.7525 mark with strong bid interest on dips below 0.75 with 0.7475 the strong support mark.

Key Resistance is seen at 0.7615 followed by 0.7655 while support starts at 0.7525 followed by 0.7475.

Kunal Sharma

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

Australian Financial Services License 246566

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