Australian FOREX Daily Oulook 01/09/2005

01/09/05 (05:00 GMT)

• Dollar crashed across the board after a shocking result in the Chicago PMI outcome which at 49.7 has come in contractionary territory for the first time in more than two years. The extent of weakness in this report now brings up question marks on the ability to sustain growth at previously forecasted levels for the rest of the year especially since oil prices are refusing to ease back. Earlier, the catalyst for the Dollar’s slide came from the downward revision to the Q2 GDP while the forecast for Q3 figures were revised down as well with the devastation caused by Hurricane Katrina playing its part. This calamity is now being touted as the costliest disaster to have ever hit the U.S. and needless to say there will be ramifications of this in one way or another.

• Euro has gone back towards the upper end of its recent range hovering around the 1.2355 resistance mark for now. In the end, the Euro has come out on top in the heavy data shootout yesterday largely due to weakness in American numbers with its own data coming in weak to mixed as well. German Retail sales declined with consumers continuing their battle with high oil costs. Unemployment rate improved in both France and Germany but corporations will soon feel the pinch of high oil and energy costs which threatens this recovery. GDP from the zone remain unchanged while inflation remained above ECB’s target. They should keep rates on hold in today’s meeting mindful of inflationary pressures as well as slowing consumption.

• Yen, after falling in the early Asian session on yet another day of poor data releases, managed to pare back its losses like other majors taking cue from dollar’s weakness. Also lending support were release of labour cash earnings which came above expectations as the employment sector maintains its steady recovery but it too is threatened by decline in corporate profits which could lead to layoffs.Oil prices have eased back slightly but remain well supported on supply concerns while lack of any data for the rest of the week puts focus on U.S. data for direction.

• Pound has pared back its losses on dollar’s weakness but is still within its recent broad range and its own fundamentals remain on the weak side. With still high interest rates, house prices declining and other sectors of the economy in a sluggish state this coupled with sky rocketing oil prices, thus it comes as no surprise that consumer confidence has slumped in the U.K. Today’s house price data should confirm that the brief period of stabilization in prices might be over. For now the Pound risks going back down to lower end of its recent range with decent selling interest above 1.8075.

• Australian Dollar has taken cue from other majors and inched higher than the Greenback however the anticipated Aussie data this week has gone against it, with results pointing towards a slowing growth environment as local consumers are mired in record level of debts amid a declining housing market. This has increased the dependence on global demand which is affected by high oil prices, thus further gains for the Aussie should be stiffened with clearer breaks eyed on other majors for direction.

Key Price Levels

EUR/USD – Yesterday’s low was 1.2189 and high was 1.2357.
The pair closed at 1.2340.

The pair is still within its recent range and has gone to the upper end, immediate resistance continues in the 1.2355-70 zone with mixed interest and no clear bias seen down till the mild support mark of 1.2240. Patchy trading is likely within this region with data outcomes eyed from both sides for a breakout. A clear break below the support mark risks acceleration of losses with next distant support region at 1.2160-75 which holds decent bid interest. Only a decisive break below this mark raises hopes of another Dollar rally otherwise the pair should stay in neutral range trading mode. On the upside, any foray above 1.24 brings decent selling interest with very strong resistance around 1.2425 and substantial offers laced all the way up to 1.25.

Key resistance is seen at 1.2365 followed by 1.2425 while support starts at 1.2240 followed by 1.2175.

USD/JPY – Yesterday’s low was 110.38 and high was 111.78.
The pair closed at 110.70.

The pair has gone back into familiar territory but conflicting fundamental factors are preventing any decisive moves. Mild support for this pair continues in the 110.40-55 zone with any break below bringing up mixed interest till the strong support region of 109.60-75 region which also hold decent Dollar bids around it. Only a clear break below this region raises hopes of a fresh Yen rally would make it hard for the Dollar to pare back its losses. On the upside, mild resistance exists around 111.55 with a break above bringing distant resistance at 112.25 where very strong offers lie and should cap any gains for the pair. Lack of Japanese data puts focus on U.S. data as well as oil price movements.

Key Resistance is seen at 111.55 followed by 112.25 while support starts at 110.40 followed by 109.60.

GBP/USD – Yesterday’s low was 1.7822 and high was 1.8057.
The pair closed at 1.8033.

The pair has gone back towards the upper end of its range but selling orders are strong around the mild resistance mark of 1.8075 and intensify as we move into the 1.81 region with very strong resistance around 1.8155. Only a break above this mark raises hopes of a fresh uptrend otherwise recent range trade should continue and losses are likely. Immediate support now comes up around 1.7925 with the pair prone to exaggeratory moves and lower end of the recent range lying around 1.7840 with strong bid interest for the Pound around 1.78. Only a break below this mark raises hopes of a fresh uptrend for the Dollar otherwise range trade should continue with manufacturing data eyed from sides of the Atlantic.

Key Resistance is seen at 1.8075 followed by 1.8155 while support starts at 1.7925 followed by 1.7840.

AUD/USD – Yesterday’s low was 0.7456 and high was 0.7555.
The pair closed at 0.7540.

The Australian Dollarhas taken cue from other majors and inched higher but further gains remain in question with immediate support in the 0.7555-70 zone with a break above bringing mixed interest till very strong resistance lies is encountered around 0.7625. Any break above would lead to strong offers which are laced all the way up to 0.77. Only a break above this mark could lead to hops of any fresh uptrend otherwise range trade should continue. On the downside decent support continues in the 0.7460-75 region with decent bid interest on moves below 0.75. A clear break below could lead to Dollar rally otherwise narrow range trading should continue.

Key Resistance is seen at 0.7570 followed by 0.7625 while support starts at 0.7460 followed by 0.7440.

Kunal Sharma

Forex Analyst

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

Australian Financial Services License 246566

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