Australian FOREX Daily Oulook 19/08/2005

19/08/05 (04:00 GMT)

Market Summary

• Dollar rallied across the board largely due to negatives both fundamentally and technically plaguing other currencies compared with the U.S. economy showing signs of steady resilience and the Fed set to increase interest rates further giving substantial yield advantage to the Greenback, thus it rightly pared back its recent losses. Philly Fed index came in higher than expected confirming the impressive recovery seen in the manufacturing sector; the report had inherent strengths with new orders rising sharply. While high oil prices would lead to its share of problems but it’s a global conundrum to be faced by all and for now sentiment is turning back in the Dollar’s favour.

• Euro has eased back further with the break of support around 1.2240 accelerating its losses before stabilizing above 1.2150 as it struggles to remain supported and risks further losses. Consumer Inflation from the zone was a bit tame as in spite of sky rocketing oil prices, producers who are well aware of the stiffened confidence within the zone aren’t passing on these high costs to consumers. This will eventually eat into corporate profits and their cost cutting could translate to high unemployment. Industrial output too was slightly below expectations as the market awaits to see if the economy in the zone can withstand high oil and energy prices.

• Yen has slipped back largely on Dollar’s general rally and lack of any data releases from Japan led to the market take profits on Yen’s recent rally. Nonetheless optimism for the economy’s outlook for the rest of the year remains strong and it continues to rally on its crosses. In another encouraging news, foreign investors bought the largest amount of Japanese stocks in 17 months while oil prices easing back is also lending support coupled with prospects of China announcing another small revaluation step this year. Today’s Consumer Confidence data is eyed to see if spike in oil prices haven’t made a sharp dent in confidence.

• Pound prone to exaggeratory movements slipped broadly and the extent of Dollar’s momentum was highlighted by the fact that U.K. data, yet again this week, came better than expected lending support to the assertion that rates won’t be cut in the short term. Retail sales declined less than expected signaling a possible bottom in consumer spending. Public sector net borrowing recorded twice the expected surplus while mortgage lending remained around steady levels. The Pound is prone to further losses as cue is taken form Dollar’s general direction.

• Australian Dollar has slipped significantly with key support levels breaking as the Greenback dominated the market while further bout of profit taking on commodities and other majors support breaking also weighed in against it. While, the Aussie unlike a few other majors does have firm supporting factors to stiffen its losses, but apart from broad based weakness in the Greenback, the Aussie is running out of reasons to break higher.

FOREX Related Upcoming Economic Releases

EUR/USD – Yesterday’s low was 1.2158 and high was 1.2293.
The pair closed at 1.2184.

The pair’s momentum has shifted back in the Dollar’s favour after key support at 1,2240 gave way. Immediate support is now seen in the 1.2145-60 zone which has held well for now with decent bid interest around it. This region was the base of Euro’s two week uptrend with a break below likely to accelerate losses with support seen around 1.2060-75 region, a break of this should lead to bottom picking bid interest around 1.20. On the upside, immediate mild resistance has moved down to 1.2270 with mixed technical interest with no clear bias up to the 1.2350 mark with only a break above to shift the pair back in neutral territory as the sentiment is with the Dollar.

Key resistance is seen at 1.2270 followed by 1.2350 while support starts at 1.2145 followed by 1.2060.

USD/JPY – Yesterday’s low was 109.93 and high was 110.65.
The pair closed at 110.41.

The pair finally gave in to Dollar’s momentum but the Yen’s continuing rally on its crosses has stiffened its losses on the main pair. But direction is a bit mixed with resistance seen in the 110.95-111.10 zone with a break above to shift the momentum back in the Dollar’s favour and the Yen risks acceleration of losses. 111 region has mixed technical interest with no clear bias before strong resistance crops up around 112.15. On the downside mild support lies around 109.45 followed by strong support in the 108.90-109.10 region which has held well so far. Any breaks below 109 have strong bottom picking bid interest for the Dollar and the pair could stay range bound if it can stay below 111.

Key Resistance is seen at 111.05 followed by 112.15 while support starts at 109.45 followed by 109.05.

GBP/USD – Yesterday’s low was 1.7913 and high was 1.8090.
The pair closed at 1.7931.

The pair is prone to exaggeratory movements and break of key support levels has accelerated its losses as it slips back into neutral territory with bias towards the Dollar. Immediate support lies around the 1.7865 mark which is a mild one with mixed technical interest down to 1.7755, as this mark holds very strong support and decent bid interest lies around it. On the upside resistance has now moved down to 1.8025 with a break above bringing mixed technical interest up to the 1.81 mark above which strong selling orders lie.

Key Resistance is seen at 1.8025 followed by 1.8105 while support starts at 1.7865 followed by 1.7755.

AUD/USD – Yesterday’s low was 0.7512 and high was 0.7610.
The pair closed at 0.7532.

The Australian Dollar has shifted back in negative territory after strong pivot support mark of 0.7555 gave way and now finds immediate support around 0.7490 below which lies a mixed technical interest zone down to 0.7430 with patch directionless moves likely within it. On the upside resistance has significantly moved down to 0.7610 followed by 0.7675 as any break into the 0.77 region remains a heavy sell zone.

Key Resistance is seen at 0.7610 followed by 0.7675 while support starts at 0.7490 followed by 0.7430.

Kunal Sharma

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

Australian Financial Services License 246566

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