Australian FOREX Daily Oulook 08/08/2005

08/08/05 (03:00 GMT)

• Dollar bulls got the payrolls outcome they were hoping for but in the current environment of sentiment mixed and slightly against the Greenback, its gains were short lived with all majors ending the day around the levels they started it. The jobs report had its inherent strengths with average hourly earnings coming in higher than expected as well, symbolizing solid increase in business confidence. This strong result makes the Fed’s job very easy, if it wasn’t so already, in raising rates in its next meeting taking it to 3.5%. Meanwhile, high oil prices refuse to ease back and have now stabilized above $60 pb which is weighing heavily against the Dollar.

• Euro resilience in staying firm in spite of a robust U.S. payrolls data is commendable with data from the Euro-zone continuing to be strong, keeping in line with the recent improvement in conditions. German Industrial Production was much higher than expected with the pick up in domestic consumer confidence translating to a healthy demand for goods. Today’s Retail PMI is eyed from across the zone with a steady improvement seen in all nations which should keep the Euro supported. However risks emanate from the prospects of further euro strengthening and oil prices staying at such high levels which would repeat the headaches faced by the Euro-Zone at start of the year on these same factors.

• Yen declined across the board and is prone to volatile moves today as political concerns persists with Prime Minister Koizumi all set to dissolve the parliament and call for fresh elections if his Postal Privatization bill is disapproved. Since some members of his own party are set to vote against it and are threatening to break away and form their own party if fresh elections are called, Koizumi is indeed under heavy pressure and being reform friendly, his loss would increase the bearish sentiment around the Yen. Earlier data was mixed with the Leading economic index going back into expansionary territory on recent improvements in consumer confidence but in spite of this household spending declined, once again highlighting the conservative nature of the Japanese spender.

• Pound has stabilized around the current levels since the last few days and this breather is natural considering the massive 1500 point see saw witnessed in the last month. While the strength of dollar fundamentals and the quickness of recent Pound gains could make further upside a bit difficult but it is also well supported on recent factors. With the ramifications of the rate cut already priced in, the NIESR in its quarterly estimate stated that there is no urgent need of further rate cuts, while GDP growth be it a bit below trend is likely to stay steady. For now, any foray into the 1.78 region should lead to selling interest.

• Australian Dollar has slipped back this morning as the RBA in its quarterly statement on Monetary policy stated that on the back of a slowing economy and easing of inflationary pressures it is unlikely to increase interest rates this year. Their statements had a dovish tone to it but with demand for exports remaining around healthy levels and economy on a reasonably firm footing for now, rates are unlikely to be cut as well with the current 5.5% set to remain on hold in the foreseeable future.

EUR/USD – Friday’s low was 1.2311 and high was 1.2395.
The pair closed at 1.2354.

The pair has crossed a key test with payrolls out of the way and the Euro coming out on trumps with is resilience to stay above 1.23 very impressive. While this strong support augurs well for a fresh uptrend but resistance is very strong within the 1.24 region with the size of offers intensifying between the 1.2450-1.25 region. Just like last year a clear break above 1.25 would accelerate its gains and would substantially minimize the chances of a Dollar comeback. The likely scenario is for the pair to remain locked in range bound movements with immediate support coming up in the 1.2260-75 zone with a break below to bring the technically mixed interest region of 1.2150-1.2260 with patchy moves likely within it. Very strong support and bid interest seen around 1.2150 and only a break below to shift the momentum back in the Dollar’s favour.

Key resistance is seen at 1.2395 followed by 1.2455 while support starts at 1.2270 followed by 1.2150.

USD/JPY – Friday’s low was 111.18 and high was 112.18.
The pair closed at 111.87.

The pair’s direction remains a bit mixed on contradictory factors but the outcome of Japanese postal bill is eyed for further direction and volatile moves are likely. Mild resistance continues in the 112.50-65 zone with decent sized selling orders lying above 113. Very strong resistance lies around 113.25 with only a clear break above to shift the momentum back in the Dollar’s favour. On the downside mild support persists in the 111.45-60 zone with decent buying interest lying on any breaks below 111 while a clear break should lead to moves towards strong support around 110.55. Today’s events have the potential to break key barriers with ease with pair remaining locked within the 111-113 range also a likely option.

Key Resistance is seen at 112.55 followed by 113.25 while support starts at 111.50 followed by 110.95.

GBP/USD – Friday’s low was 1.7717 and high was 1.7823.
The pair closed at 1.7788.

The pair’s price action on Friday mirrored the one seen in the last few days with bottom picking bid interest coming up on moves towards 1.77 while it continues to be sold on its foray towards 1.7825. For now, direction remains a bit mixed with strong resistance in the 1.7805-20 zone with a break above likely to accelerate losses before strong resistance is seen around 1.7855 which should cap any gains. A clear break below 1.77 brings into focus support in the 1.7645-60 zone with a break below to shift intra day momentum in the Dollar’s favour

Key Resistance is seen at 1.7805 followed by 1.7845 while support starts at 1.7690 followed by 1.7620.

AUD/USD – Friday’s low was 0.7659 and high was 0.7713.
The pair closed at 0.7681.

The RBA dovish statement should make the Australian Dollar’s upside difficult with selling orders above 0.77 remaining strong and intensify around 0.7750. Immediate resistance is seen in the 0.7705-20 zone which could gap any gains for today with its inability to break above likely to lead to slow range bound movements. Mild bid interest lies around 0.7605 with very strong support in the 0.7555-70 region and only a break below to shift intra day sentiment in the Dollar’s favour.

Key Resistance is seen at 0.7695 followed by 0.7735 while support starts at 0.7605 followed by 0.7555

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