Australian FOREX Daily Oulook 25/08/2005

25/08/05 (05:00 GMT)

• Dollar slipped back and pared all its early intra day gains yesterday after a shockingly poor Durable Goods orders outcome. The new orders figure was the weakest in more than a year which caught many, who were geared to push the dollar higher expecting a solid result, off guard and the profit taking ensued. While the orders are known to be volatile and the decline is more of a case of seasonal factors, the market’s concern emanates from the effect high oil prices would have on future orders. Dollar has crashed in Asian trading as oil prices have hit a new high by inching above $68 pb on concerns that storms of the Gulf of Mexico would play havoc with production.
  

• Euro has managed to break back above 1.23 with the better than expected result from Industrial orders in the zone and poor U.S. data coupled with strong technical support on dips below 1.22 has helped it inch higher. Inline with the recent improvement in the economy increased domestic demand has complimented rise in exports as the focus shifts to German IFO biz climate index which should also inch higher. This recovery in the zone is led by Germany, where improved labour conditions has been the catalyst but this is threatened by high oil prices eating into corporate profits which could translate to layoffs. For now, the Euro is back in neutral territory with very strong resistance above 1..2355.

• Yen like other majors has strengthened on dollar’s weakness but its gains were stiffened as concern is growing on the repercussions of high oil prices on the recovery of the economy. This morning’s Trade Balance data has shown the surplus shrinking on two counts, the negative coming from the high import costs of oil which are likely to increase further while the strong pick up in domestic demand has seen a healthy demand for imported products. This is generally positive and it is hoped that the recovery in the Euro-Zone coupled with the usual strong demand from the U.S. and Asia should further boost Japanese exports. For now, it continues to resonate within its 109-111 range with a breakout needed for a fresh trend.
  
  

• Pound has gone back above 1.80 solely on dollar’s broad based weakness and is weakening on its crosses with any turnaround by the Greenback likely to hit the Pound the hardest as it has weakest fundamentals to show at the moment. After the GDP downgrade by the BCC, the Confederation of British Industry followed suit and slashed its projection even lower to 1.9% which is far below the government’s estimation of 3% to 3.5%. Another negative came from manufacturing orders falling to its lowest level in nearly 2 years as in spite of good export growth the sluggish domestic demand is failing to pick up.Pound could run out of steam with selling orders intensifying above 1.81.

• Australian Dollar gained further but remained within the 0.75 region with decent offers lined within the 0.76 region which would stiffen any prospective gains. The extremely slow and range bound movements in the Aussie this week are in anticipation of crucial local data next week which will provide the next direction.

EUR/USD – Yesterday’s low was 1.2161 and high was 1.2278.
The pair closed at 1.2257.

The pair is playing the range well and has been impressive and breaking mild support around 1.2255 but stronger support lies above 1.2325 with decent sized offers lined within the 1.23 region. Any prospective break above this region beings very strong resistance around 1.2415 which is expected to cap any gains. On the downside, immediate support now comes up at 1.2240 pivot mark with a break below likely to accelerate its losses which will bring into focus the strong support region of 1.2160-75 and is expected to cap any losses with mixed technical interest with no clear bias down to 1.21.

Key resistance is seen at 1.2255 followed by 1.2310 while support starts at 1.2125 followed by 1.2055.

USD/JPY – Yesterday’s low was 109.99 and high was 110.72.
The pair closed at 110.41.

The pair continues to play within its 109-111 range with strong resistance continuing in the 111.05-20 zone with only 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 has now moved up to 109.45 followed by strong support in the 108.90-109.10 region which has held well so far while any breaks below 109 have strong bottom picking bid interest for the Dollar

Key Resistance is seen at 111.05 followed by 111.55 while support starts at 109.45 followed by 108.90.

GBP/USD – Yesterday’s low was 1.7906 and high was 1.8030.
The pair closed at 1.7983.

The pair has rebounded strongly breaking back above 1.80 but upside will be very difficult from here on. While mixed interest with mild dollar bias lies between the 1.8050-1.8140 region, selling orders intensify above it 1.82 is a pivot mark with very strong resistance and only a break above would shift the sentiment back in the Pound’s favour. On the downside immediate support has now moved up to 1.7960 with any break below 1.79 to bring up decent bottom picking bid interestfollowed by very strong support around 1.7875.

Key Resistance is seen at 1.8075 followed by 1.8155 while support starts at 1.7960 followed by 1.7875.

AUD/USD – Yesterday’s low was 0.7510 and high was 0.7573.
The pair closed at 0.7555.

The Australian Dollarupside looks difficult in spite of it remaining reasonably supported and narrow range bound trading should continue before a break out is eyed next week. Immediate support is now seen around 0.75 with decent bid interest around this mark. A break below risks further acceleration of losses till strong support is encountered around 0.7425 and sentiment would shift in deep negative territory. On the upside, immediate resistance is seen around 0.7610 with any foray above 0.7625 leading to strong selling interest. Very strong resistance exists around 0.7675 with only a break above to shift the pair back into neutral territory.

Key Resistance is seen at 0.7610 followed by 0.7675 while support starts at 0.7505 followed by 0.7425.

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