Australian FOREX Daily Oulook 18/08/2005

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18/08/05 (05:00 GMT)

Market Summary

• Dollar experienced another day of gains as lack of any significant factors to push other currencies up coupled with key technical barriers helping the Greenback as led the market to focus on the prospect of more rate increases from the Fed. This assertion increased after PPI came in much higher than expected with core rate rising as well. While consumer inflation was a bit tame such a spike in producer’s inflation is bound to compel them to pass on these high costs. Oil prices have eased back which would be a welcome relief for beleaguered consumers as effects of prices at such high levels are beginning to be seen at every step.

• Euro has slipped further as direction was derived from U.S. data as well as strong resistance barriers making Euro’s upside hard to achieve. In another reminder that high oil prices is not just an American problem but a global conundrum, French trade deficit went to a record high as the huge spike in high import costs of oil weighed in against it. With exports just starting to pick up, these recent signs of recovery in the economy threaten to be just a mirage as the Euro has started to appreciate and high oil prices would stiffen consumer spending. Focus shifts to today’s Inflation and Industrial Production data from the zone.
  

• Yen has pared back some of its recent gains breaking above 110 as lack of any Japanese data kept it a bit directionless and subjected to mild profit taking. Nonetheless it is within its range and has strong support on any foray towards 111. The recent strong run on the Nikkei as well as the general pick up in economy is seriously threatened by oil prices at such high levels and it also makes the maintenance of steady domestic demand crucial in the current environment of stiffened global demand. With the U.S. Fed set to increase interest rates further, Japan’s zero interest rates stands out as a big negative.
  

• Pound remained firm against the Greenback while gaining on its crosses as upside surprise in data outcomes for third consecutive day kept it firmly supported. The minutes of Bank of England’s rate cutting meeting showed a 5 to 4 vote in favour of a cut with Gov. King voting against the action. The hawkish tone of the report suggest that rates are unlikely to be cut again in the foreseeable future with recent pick up in inflation adding credence to this. Employment data was within expectations with the jobless claims rising less than expected while average earnings remained steady. Like the Euro, the Pound’s upside is stiffened by strong technical resistance as today’s retail sales data is eyed for further direction.
  

• Australian Dollar has slipped further as thin market conditions have seen a bout of profit taking across the board on dollar shorts. With upside beyond the strong pivot resistance mark of 0.7755 looking increasingly difficult with a few attempts having failed, the Aussie risks further losses as commodity prices have also eased back. Nonetheless its direction remains neutral as long as the strong support zone of 0.7540-55 continues to hold well and it could be locked in range bound movements.

EUR/USD – Yesterday’s low was 1.2260 and high was 1.2365.
The pair closed at 1.2264.

The pair has eased further as lack of any upside momentum is leading to further profit taking as the pair has moved back into neutral territory. Immediate support which also holds decent bid interest lies in the 1.2240-55 zone, above which lies a technically mixed interest region with no clear bias up to 1.2360. Mild resistance has moved up to 1.2375 followed by very strong resistance and offers lined between the 1.2455-1.25 region, with only a break above to raise hopes of a fresh uptrend otherwise it remains vulnerable for further losses. A break below 1.2240 brings very strong support around 1.2175 which is expected to hold while any moves lower to shift momentum back in the Dollar’s favour.

Key resistance is seen at 1.2375 followed by 1.2455 while support starts at 1.2240 followed by 1.2175.

USD/JPY – Yesterday’s low was 109.38 and high was 110.07.
The pair closed at 109.95.

The pair remains locked in narrow range bound movements with mild bid tone for the Yen and resistance levels for the pair having moved down significantly with mild barrier at 110.25. A break above will bring into focus very strong resistance around the 110.75 mark which is expected to cap any Dollar rally with only a break above 111 to shift the pair back in neutral territory. Immediate support comes up in the 108.70-85 region with a clear break below to accelerate losses for this pair which could only provide distant support around the 108 mark with bottom picking bid interest. This would also shift the Dollar in deep negative territory and reduce chances of its comeback

Key Resistance is seen at 110.25 followed by 110.75 while support starts at 108.70 followed by 108.05.

GBP/USD – Yesterday’s low was 1.8018 and high was 1.8116.
The pair closed at 1.8040.

The pair is buoyed after breaking key resistance barriers and better than expected data continued yesterday. Very strong resistance lies around 1.82 and any upside to challenge this region looks difficult for now. On the downside immediate support is seen around 1.8010 with decent bid interest on any breaks below 1.80, with a decisive break below to bring into focus the strong support region of 1.7940-55 while a clear break below this pivot region would shift the pair back in neutral territory. Offers start getting stronger above 1.8150 with the mixed technical interest down till the 1.8010 mark.

Key Resistance is seen at 1.8145 followed by 1.8205 while support starts at 1.8010 followed by 1.7940.

AUD/USD – Yesterday’s low was 0.7590 and high was 0.7684.
The pair closed at 0.7590.

The Australian Dollar is failing to break above the crucial 0.7755 mark as very strong offers are laced up till the 0.78 region with only a break above this mark raises hopes of a fresh uptrend other wise the pair is likely to be locked in narrow range bound movements or risks losses. Immediate resistance has moved down to 0.7705 while on the downside immediate support has moved up to the 0.7590 mark with a break below bringing decent support and bid interest around 0.7555 with any moves lower to shift the pair back in the Dollar’s favour.

Key Resistance is seen at 0.7705 followed by 0.7745 while support starts at 0.7590 followed by 0.7555

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