Australian FOREX Daily Oulook 12/07/2005

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12/08/05 (05:00 GMT)

• Dollar experienced another bout of broad fall as sentiment and momentum has turned squarely against it and with Trade Deficit data to look forward to, it remains on the backfoot. Deficit could widen more than expected as high oil prices have increased import costs while the robust spending of the American consumer has translated to increased appetite of imported goods. Earlier, Retail Sales was around healthy levels but came below expectations of a robust outcome while the now familiar tri factor of geo-political uncertainties, prospects of hurricanes as well as refinery problems has pushed oil prices towards another record high of $66 pb.
  

• Euro marched ahead but its gains for the day were less than 100 points as the strong technical barrier at 1.25 is holding firm for now but a bad deficit result could lead to this barrier broken decisively. Data from the Euro-Zone was again on the strong side but this time it was more significant as the strength emanated from Italy, a region which so far had failed to reap the benefits of improved conditions in the zone. Italian GDP was higher than expected signaling the economy coming out of recession but it could go back into that territory if the Euro keeps strengthening at this pace and oil prices continue to sky rocket.
  

• Yen has strengthened further with focus back on fundamentals and optimism for the Japanese economy growing by the day. Even though this morning’s Q2 GDP outcome has come in lower than expected it is not reflective of the current pick up in the economy with Q3 figures to reflect the real strength. Industrial Production has been revised higher as output increases with increased domestic demand and spending auguring well for further pick up in the manufacturing sector. For now, the Yen is around the same levels where its post Yuan revaluation gains were capped with a clear break below to further accelerate its gains.

• Pound rallied by around 200 points breaking key barriers at 1.80 as well as easing past 1.81 as positions, built in the last few months on the assertion of rate cuts in quick succession, are now being squared as Bank of England’s inflation report has provided firm clues of them staying on hold in the short term. Data outcomes would be evaluated and in spite of a few signs of pick up, the economy is slowing with key sectors in a sluggish state. Currently it is at levels which have no clear technical bias but since sentiment has turned against the Dollar, the Pound continues to make steady gains.
  

• Australian Dollar remains well supported in spite of RBA Governor Macfarlane’s slight dovish tone as he stated that he doesn’t expect interest rates to change on the back of cooling in consumer spending and borrowing as well as inflation in check while the next move could be in either direction. But for now the strengthening of commodity prices is lending solid support to the Aussie as it looks to break the key 0.7755-0.78 region which is laced with offers.

FOREX Related Economic Data Released

FOREX Related Upcoming Economic Releases

EUR/USD – Yesterday’s low was 1.2377 and high was 1.2475.
The pair closed at 1.2454.

The pair needs to decisively break the wall at 1.25 which could start a fresh uptrend but it has to clear the strong offers around that mark. With focus on U.S. deficit data, a bad result would help the Euro clear these barriers with ease and could accelerate its gains. Support levels have moved up significantly with immediate level coming at 1.2360-75 zone with a break below to bring into focus very strong support around 1.2310 and bottom picking bid interest below 1.23. Only moves towards the 1.2240 pivot mark would shift the sentiment back in neutral territory otherwise it remains in the Euro’s favour. On the upside a break above 1.25 brings distant resistance around 1.2615 with data outcomes eyed for direction.

Key resistance is seen at 1.2515 followed by 1.2605 while support starts at 1.2360 followed by 1.2310.

USD/JPY – Yesterday’s low was 109.56 and high was 110.58.
The pair closed at 109.86

The Yen continues to pare back its recent losses with sentiment back in its favour and it is around the support mark of 109.70 with a clear break below to bring into focus very strong support zone of 108.90-109.10 which also holds decent Dollar bid interest. A break below this region could lead to further acceleration of gains for the Yen and significantly reduce any chances of a Dollar comeback. On the upside resistance levels have moved down another level with immediate resistance seen around 110.60 and a break above to lead to strong resistance around 111.25-40 region which is expected to cap any gains for the pair.

Key Resistance is seen at 110.55 followed by 111.45 while support starts at 109.70 followed by 108.95.

GBP/USD – Yesterday’s low was 1.7954 and high was 1.8135.
The pair closed at 1.8101.

The pair has mounted another impressive rally breaking key resistance levels with ease while the 1.8050-1.82 region has no clear technical bias the current sentiment which is against the Greenback is leading to the Pound remaining supported. Mild resistance crops at 1.8145 with a break above to lead to patchy moves before very strong resistance comes up at 1.8225 which is expected to cap any Pound gains for the day. On the downside, support has moved to around 1.8010 while a break below could accelerate losses before strong support comes up at 1.7930-45 which is likely to cap any losses.

Key Resistance is seen at 1.8145 followed by 1.8225 while support starts at 1.8010 followed by 1.7935.

AUD/USD – Yesterday’s low was 0.7642 and high was 0.7747.
The pair closed at 0.7626.

The Australian Dollar remains well supported breaking back above 0.77 but strong offers lie above 0.7755 which are laced up to 0.78. Thus any gains would be stiffened but at same time strong support has moved up to the 0.7650 level with any break lower to bring very strong bid interest around the 0.76 mark. 0.76-0.78 is the likely range with slow range bound movements within it is likely however a break above would make it very difficult for the Dollar to reverse its losses.

Key Resistance is seen at 0.7755 followed by 0.7805 while support starts at 0.7655 followed by 0.7605

Kunal Sharma

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

Australian Financial Services License 246566

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