Australian FOREX Daily Oulook 10/08/2005

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10/08/05 (05:00 GMT)

• Dollar remained around the same levels against most majors with the Fed raising rates by 25 bps and don’t look close to being done with their tightening cycle. Their accompanying statement was on familiar lines with a few minor changes as they remain optimistic about the direction of the economy with inflation reasonably under control, interest rates are expected to keep getting raised going into early next year. While the sentiment and momentum has turned against the Dollar, tomorrow’s retail sales and Trade balance data the day after are keenly eyed for fresh direction.
  

• Euro managed to break above 1.24 but met with strong offers and has stabilized within the familiar region of 1.23 for now. While key technical barriers lined up to 1.25 could make further gains stiffened it remains well supported as data continues to point towards steady recovery. German Trade balance recorded a higher than expected surplus with the substantial rise in exports lending support while mixed domestic demand has led to a decline in imports. Today’s manufacturing data from France is expected to be on the strong side which should keep the Euro supported with rest of the week’s U.S. data eyed for a break out.

• Yen managed to retrace its losses on the back of strong fundamentals as optimism about the Japanese economy grows with Bank of Japan upgrading its assessment with improvement in IT related sectors cited as the reason. Earlier Machine orders came in much higher than expected with the rise led by domestic conditions as exports remain mixed. Nikkei is having a strong run with today’s consumer confidence index is set to show an improvement while Trade surplus is expected to increase. Barring any political drama the Yen’s downside is well covered as it looks to pare its recent losses on its crosses.

• Pound remains well supported as the sharp fall in retail sales was shrugged aside by the market but instead it focused on the positives of the Trade deficit declining. This improvement was largely due to the steady improvement in exports to the Euro-zone where at least in Germany and France consumer demand has picked up. It has managed to edge back above 1.79 with support derived more from the assertion that rates would not be cut in the near future rather than on any strong growth outlook as the economy remains in a soft state,

• Australian Dollar has slipped back below 0.76 before managing to go back up thanks to consumer confidence index jumping to a 6 month high, with rates to be kept on hold for the rest of the year; it is welcome relief for an average consumer embroiled in debt. However apart from a broad based decline in the Greenback, there are no factors to push the Aussie higher with the U.S. Fed not looking like close to stop raising rates and by next year the Aussie’s substantial yield advantage would vanish.

FOREX Related Upcoming Economic Releases

EUR/USD – Yesterday’s low was 1.2330 and high was 1.2414.
The pair closed at 1.2355.

The pair’s scenario remains the same as it is locked in range bound movements with its 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 starting with 1.2420 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. But the likely scenario is for the pair to remain locked in range bound movements with immediate support coming up in the 1.2280-95 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 1.2420 followed by 1.2475 while support starts at 1.2290 followed by 1.2240.

USD/JPY – Yesterday’s low was 111.65 and high was 112.23.
The pair closed at 111.77.

The pair has retraced its recent losses thanks to good fundamentals but mild dollar bid interest continues around the 110.75 mark. A clear break below the support region of 110.70-85 is expected to hold with to shift the momentum back in the Yen’s favour and could accelerate gains towards the distant 109.90 pivot support mark. On the upside immediate resistance has moved back down to 112.05 with a break above to lead to patchy moves with selling interest intensifying above 112.55 lined up to 113. The Yen is likely to pare back its recent losses on its crosses which should lend support on the main pair.

Key Resistance is seen at 112.05 followed by 112.55 while support starts at 110.70 followed by 109.90.

GBP/USD – Yesterday’s low was 1.7818 and high was 1.7915.
The pair closed at 1.7865.

The pair’s downside seems protected by another bout of positive data with immediate support coming up around 1.7925-40 zone which is likely to hold well. A clear break above this region brings into focus strong resistance around 1.80 with decent selling interest around that mark and profit taking could stiffen gains from here on. Downside scenario remains the same with bottom picking bid interest coming up around 1.78 but a clear break below could accelerate losses towards with the next strong support region at 1.7740-55 which is expected to hold.

Key Resistance is seen at 1.7940 followed by 1.7995 while support starts at 1.7810 followed by 1.7745.

AUD/USD – Yesterday’s low was 0.7587 and high was 0.7661.
The pair closed at 0.7607.

The Australian Dollar should continue to be locked in narrow range bound movements as it has no factors technically or fundamentally to push it higher decisively from here on. 0.77 remains as the sell zone with offers intensifying on any break above 0.7755 and laced all the way up to 0.78. On the downside mild support continues around 0.7590 with a break below likely to accelerate losses towards 0.7555 which is a strong pivot mark and expected to lend the Aussie solid support.

Key Resistance is seen at 0.7675 followed by 0.7725 while support starts at 0.7595 followed by 0.7555

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