FOREX Trading Australia Daily Outlook 23/05/2005

23/05/05 (02:00 GMT)

FOREX Trading Australia – Market Summary

· Dollar rallied on a day devoid of any key data releases but Greenspan’s upbeat comments, the prospect of strong U.S. data this week as well as continuation of weak data from other regions were enough to maintain the positive sentiment around the Dollar. Greenspan stated that rates were not yet above neutral and was optimistic on the economy’s direction. Also he is happy with the inventory built up and expects oil prices to recede further. Irregardless of Yuan revaluation or U.S. deficit issues, Dollar seems the best bet for short term traders and is accordingly benefiting.

· The Euro’s losses accelerated after the decisive loss of 1.26 before stabilizing around the second support mark around 1.2545 but continues to remain vulnerable for further losses. Weak data from the zone continues leading to deterioration in sentiment around the single currency. French Q1 GDP came in lower than expected while the yearly GDP forecast was revised down as exports fail to pick up. Italian Industrial orders declined sharply as domestic demand like in the rest of the Euro-Zone is hindered by rising unemployment.

· The Yen has completed a full circle in a month as the immense speculation of Yuan revaluation in the immediate short term has subsided, leading to further liquidation of longs built in anticipation. Meanwhile, Bank of Japan in its monthly report stated that the economy should continue recovering and kept its liquidity target unchanged. Nonetheless deflationary conditions persists while China’s decision to impose tariffs on exports seen as an appeasement measure to the U.S. is bound to hurt Japanese corporations exporting through China. For now resistance is strong around 108.75 for the Greenback.

· The Pound fell further breaking decisively below 1.83 and was also sent lower on its continuous rejection from strong offers above 1.84. Meanwhile the British Banker’s Association stated that demand for mortgage is declining while the housing market has temporarily stabilized at a lower level with risks of further falls. Some of the mystery in last few months surrounding the direction in the U.K. economy and interest rate scenario has cleared with the U.S. events the main driver for the Pound.

· The Aussie taking cue from other majors met strong offers above 0.76 and slipped back to its support zone at 0.7530-45 which continues to hold well so far. But with the direction of commodity prices remaining mixed, a break below the support zone with any break into the 0.74 region could accelerate losses for the Aussie.

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Technical Analysis

EUR/USD – Friday’s low was 1.2536 and high was 1.2652.
The pair closed at 1.2558.

The Euro losses accelerated after the recent strong support around 1.26 gave way. Bottom pickers failed to push it higher and promptly liquidated their positions. For now mild support exists in the 1.2525-45 support zone. With a break below 1.25 likely to accelerate losses as sentiment has turned against it in a strong way with U.S. data outcomes to lead the direction. On the upside mild resistance is around 1.2650 with strong offers on any break above 1.27.

Key resistance is seen at 1.2645 followed by 1.2715 while support starts at 1.2545 followed by 1.2475.

USD/JPY – Friday’s low was 107.33 and high was 108.27.
The pair closed at 108.13

The pair is back to square one after the highly speculated Yuan revaluation didn’t eventuate. Data outcomes remain weak with U.S. data eyed for further direction. Strong resistance exists around 108.75 for this pair with any break above 109.25 to lead to strong offers. On the downside, mild Dollar bids lie around 107.55 followed by decent buying interest on any move below 107.

Key Resistance is seen at 108.45 followed by 108.95 while support starts at 107.55 followed by 106.85.

GBP/USD – Friday’s low was 1.8233 and high was 1.8390.
The pair closed at 1.8265.

The Pound’s fundamentals remain on the weak side thus it continues to be offered on any minor rallies with very strong resistance around 1.84. On the downside, bottom pickers failed to keep it above 1.83 with mild support around 1.8225. Distant support is seen in the 1.8125-50 zone with mixed technical interest above that region.

Key Resistance is seen at 1.8355 followed by 1.8415 while support starts at 1.8225 followed by 1.8155.

AUD/USD – Friday’s low was 0.7534 and high was 0.7606.
The pair closed at 0.7557.

The pair targeted the strong support zone at 0.7530-45 but failed to break below as strong bids lie in that zone. A break below 0.75 pivot mark could accelerate losses. On the upside, 0.7615-25 now holds strong resistance. Key U.S. data is eyed for further direction

Key Resistance is seen at 0.7605 followed by 0.7655 while support starts at 0.7525. followed by 0.7475.

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

Australian Financial Services License 246566

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