FOREX Trading Australia Daily Outlook 06/05/2005

FOREX Outlook 06/05/2005 (02:00 GMT)

FOREX Trading Australia – Foreign Exchange Market Summary

· Dollar remained confined to narrow ranges as the market adopts a neutral position ahead of today’s Jobs data. U.S. productivity accelerated faster than expected with Unit labor costs, a key measure of inflationary pressure, also increasing. Dollar remains supported on expectations of a payrolls number around 200 K but some quarters believe it to be much lower given the sharp fall in the ISM Services employment index, thus either way the outcome is likely to lead to volatile moves.

Euro

· The Euro in spite of any amount of uncertainty surrounding the U.S. growth and interest rate outlook cannot push decisively past 1.30 with an unsatisfactory U.S. payrolls outcome looking like its only chance to break higher while a good result could send the Euro towards its yearly lows. Meanwhile, opinion polls continue to show a tight contest for French referendum on the EU constitution to be held end of this month. For now it remains directionless in the 1.29 region.

Yen

· The Yen remains well bid with more speculators adding to their long positions as Chinese officials are in the U.S. as part of their regular technical discussions. However the market expects some concrete steps in terms of Yuan revaluation as U.S. officials are likely to exert more pressure on their Chinese counterparts. Japanese markets reopen today with monetary base expanding from last year but credit growth remains on the weak side.

Pound

· The Pound went towards 1.9075 on the relief of Labor all set to retain power however their majority is to be reduced significantly which obviously makes it difficult to push Blair’s planned reforms through smoothly. Some sections also believe that Blair might make way for Brown mid way through his tenure. Thus the focus shifts to U.S. payrolls and Monday’s U.K. rate decision.

Australian Dollar

· The Australian dollar remains supported with this morning’s Quarterly RBA Monetary Policy statement having a hawkish tone to it as they expressed surprise if rates did not have to increase in the near future with expectations of a gradual increase in inflation. However, the real surprise is the underestimation by the RBA of the likelihood of slow growth for the domestic economy in months to come.

Economic Data Released

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*Only key potential market moving data is mentioned, for a detailed Economic Calendar please click on the ‘Financial Calendar’ link on the web-site.

FOREX Technical Analysis

EUR/USD – Yesterday’s low was 1.2925 and high was 1.2988.
The pair closed at 1.2945.

The pair remains confined within the 1.29 region ahead of Payrolls while Poor data from the zone and conflicting signals from the U.S. Fed are keeping the direction a bit mixed. Resistance exists around 1.3010-25 followed by a stronger one in the 1.3095-1.3115 zone. On the downside mild support exists around 1.2875 with a break below targeting the good buying zone of 1.2795-1.2815.

Key resistance is seen at 1.3015 followed by 1.3125 while support starts at 1.2875 followed by 1.2795.

USD/JPY – Yesterday’s low was 104.22 and high was 104.67.
The pair closed at 104.62.

Japanese markets re open today but movements are directed by Dollar’s general direction. The pair managed to break below 104.55 but another statement from China has sent it off its lows. On the upside the Yuan story is keeping the Yen well bid with strong offers around 105.25 for this pair. On the down side mild support around 104.25 is followed by a stronger zone at 103.75-90 with payrolls the focus.

Key Resistance is seen at 105.15 followed by 105.75 while support starts at 104.25 followed by 103.70.

GBP/USD – Yesterday’s low was 1.8994 and high was 1.9075.
The pair closed at 1.8990.

Labor set to be reelected but with a reduced majority leaves a bitter sweet feeling for the Pound thus on the upside mild resistance exists around 1.9075 followed by a stronger one around 1.9125. Any foray close to 1.92 should see strong selling interest. On the downside decent buying interest exist on dips below 1.90 while strong support exists around the pivot mark of 1.8940 followed by 1.8875.

Key Resistance is seen at 1.9075 followed by 1.9125 while support starts at 1.8940 followed by 1.8875.

Australian Dollar

AUD/USD – Yesterday’s low was 0.7770 and high was 0.7826.
The pair closed at 0.7797.

The Aussie remains supported with growth doubts in other major regions helping it by default. Support and buying interest remains above the 0.7755 mark with very strong support on dips down towards 0.77. On the upside 0.7825-40 zone continues to hold resistance with a break above bringing the 0.7875 mark into focus.

Key Resistance is seen at 0.7840 followed by 0.7875 while support starts at 0.7755. followed by 0.7705.

Kunal ‘Kris’ Sharma
Forex Analyst
E-mail: kris@easy-forex.com

Australian Financial Services License 246566

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