Australian FOREX Daily Oulook 29/08/2005

29/08/05 (02:00 GMT)

• Dollar has fallen in early Monday trading as oil prices have skyrocketed past $70 pb due to Hurricane Katrina shutting down U.S. oil production off the coast of Mexico. Earlier on Friday it managed to pare back its intra day losses as it seemed that the hurricane would miss the key areas of production and would have minimal impact. The effect of such high oil prices was instrumental in slipping the consumer sentiment index with the spike hitting consumers where it hurts most. Greenspan’s speech in spite of its warnings on the housing market was relatively hawkish as it maintained the Fed’s stance for rate hikes. The focus shifts to a wealth of data from the U.S. with robust results required to offset negatives emanating from high oil prices.
  

• Euro kept within its range on Friday with any foray above 1.2355 continuing to lead to decent selling interest but the spike in oil prices could translate to the Euro being well supported as Dollar is unlikely to rally in the current environment. However high oil prices is not just a U.S. problem but a global conundrum which is likely to be confirmed in today’s German consumer confidence survey with a decline expected. Recent pick up in domestic demand has led the recovery in the economy which is now threatened by consumers spending curbed by high prices.
  

• Yen continues to resonate between its narrow ranges but has eased back on its crosses as the second largest importer of oil feels the effects of the spike in prices. Earlier on Friday speculation and the following denial from China in regards to the Yuan revaluation led to some volatile moves. Consumer inflation was very tame in spite of oil prices spiking higher as producers aren’t confident to pass on these high costs indicating that deflationary conditions still linger in the economy. Finance Minister Tanigaki lashed out at the opposition party’s call to end the central bank’s zero interest rate policy as he cited mild deflation.

• Pound is prone to exaggeratory movements and has managed to go back towards the mild resistance around 1.8085 on Dollar’s general weakness but it continues to be sold around those levels. However it also remains supported with recent pick up in data pointing to towards rates unlikely to be cut again in the foreseeable future. Earlier on Friday the Q2 GDP data was revised upwards led by the pick up in industrial activity while like the Euro-Zone, a weaker currency has helped exports increase by much higher than expected for the U.K. Local markets are closed today as the Pound looks to break out from its recent range trade.

• Australian Dollar is positioned in neutral territory ahead of key data releases tomorrow in the form of Trade Balance and Retail sales data. Deficit is expected to increase as high import costs of oil offsetting the healthy level of export growth while sales are expected to ease back with the high borrowing costs coupled with consumer beleaguered with high oil prices is curbing spending habits. For now any foray above 0.7625 should continue to lead to decent selling interest.

EUR/USD – Friday’s low was 1.2271 and high was 1.2341.
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 109.37 and high was 110.37.
The pair closed at 110.16.

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 1.7988 and high was 1.8096.
The pair closed at 1.7997.

The pair has found selling offers above 1.8055 too strong too handle and has eased back hovering around 1.80. Support has held well in the 1.7940-55 zone but a break below could accelerate its losses before distant support comes up at 1.7870 and strong bottom picking bid interest around 1.78.But the pair still remains locked within its recent broad range and a breakout is eyed this week. On the upside, size of selling orders intensifies above 1.81 lined all the way up to 1.82 with very strong resistance in the 1.8175-1.82 zone.

Key Resistance is seen at 1.8075 followed by 1.8155 while support starts at 1.7955 followed by 1.7870.

AUD/USD – Yesterday’s low was 0.7548 and high was 0.7603.
The pair closed at 0.7555.

The Australian Dollarremains reasonably supported but upside looks more difficult and narrow range bound trading should continue before key data outcomes this week provide fresh direction. 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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