Australian FOREX Daily Oulook 26/08/2005

26/08/05 (05:00 GMT)

• Dollar stabilized after falling earlier on oil related concerns as continuation of prices at such current high levels leads to further examination of the dependence of the economy on Oil and the severe ramifications of it, making it hard for the Dollar to gain further. Thin summer markets are also playing their part in patchy trading with position squaring leading to mixed short term direction. Jobless claims remained steady around its recent levels while the Help wanted index inched higher with key labour market indicators pointing towards another healthy outcome in next week’s Payrolls data.

• Euro was halted in its tracks as data came lower than expected while decent sized selling orders lying above 1.2325 also kept any gains in check. German IFO business confidence index unexpectedly fell as in spite of an optimistic outlook for the economy, concern was expressed on the current situation. Since the deterioration in confidence was seen more in the retailing sector than manufacturing, it was further evidence that high oil prices is leading consumers to cuts costs in purchases of other items.
  
  

• Yen after gaining ground early on dollar’s general weakness pared back its intra day gains as high oil prices is feared to halt the steady recovery seen in the economy. Also weighing in against the Yen was the heavy bout of profit taking seen on the Nikkei after its impressive rise in the last few weeks. This morning’s consumer inflation data has seen the result in line with expectations with any upside due to spiking oil prices not forthcoming. Producers aren’t yet confident to pass on their high costs as deflationary conditions persist around the economy. For now, the Yen continues to trade within its 109-111 range.

• Pound continues to hover around the 1.80 mark as mixed data coupled with the market’s intention to play the range is keeping short term direction a bit mixed with GDP outcome eyed today for further clues. Earlier, data showed that the level of Business investment rose due to rise in construction and production which offset fall in services investment. U.K. car production fell sharply as domestic demand remains soft while mortgage approvals declined which could have been due to expectations of further rate cuts. Irrespective of data outcomes, selling interest is strong on any break above 1.81.

• Australian Dollar managed to break back above 0.76 before encountering strong offers and easing back but it remains well supported on its stable fundamentals and should continue on narrow range trading in anticipation of key market moving data next week from both Australia and the U.S. Intra day direction for the Aussie is derived from commodity prices which have eased back slightly.

EUR/USD – Yesterday’s low was 1.2256 and high was 1.2326.
The pair closed at 1.2281.

The pair continues to play its range but has inched to the upper end with immediate resistance seen around 1.2355 with decent sized offers lined within the 1.23 region which would stiffen any prospective gains. In case of a break higher very strong resistance exists around 1.2415 which is expected to cap any gains. The size of selling orders intensify within 1.24 with only a break above the pivot 1.25 mark to raise hopes of a fresh uptrend otherwise the Euro remains vulnerable for losses. 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 1.2355 followed by 1.2415 while support starts at 1.2240 followed by 1.2160.

USD/JPY – Yesterday’s low was 109.75 and high was 110.43.
The pair closed at 110.29.

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 1.7982 and high was 1.8082.
The pair closed at 1.7994.

The pair rebounded strongly breaking back above 1.80 but upside will be very difficult from here on and has pulled back after encountering strong offers. While mixed interest with mild dollar bias lies between the 1.8050-1.8140 region, selling orders intensify above it with strong resistance around 1.8155. 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 interest followed 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 0.7554 and high was 0.7613.
The pair closed at 0.7571.

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 0.7545 with decent bid interest around this mark. A break below risks further acceleration of losses till strong support is encountered around 0.7475 and sentiment would shift in negative territory. On the upside, immediate resistance is seen around 0.7625 with any foray above it leading to strong selling interest. Very strong resistance exists around 0.7675 with only a break above to shift the sentiment back in the Aussie’s favour.

Key Resistance is seen at 0.7625 followed by 0.7675 while support starts at 0.7545 followed by 0.7475.

Kunal Sharma

Forex Analyst

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

Australian Financial Services License 246566

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