Australian FOREX Weekly Outlook 05/09/2005

September 5, 2005

Trading Forex Online with Easy Forex

5/09/05

FOREX – Australian Dollar Market Comment

Most majors have finally broken through their summer thin trading ranges but it took the costliest natural disaster to have ever hit the US to bring about some decisive movements. The repercussions of this natural, and given the shabby relief efforts could also be described as a man made disaster, will be felt in all key areas of the economy. The sorry state of affairs witnessed in disbelief by the entire world has added to negative sentiment around the Dollar with current estimates of damage having gone up to $100 billion and still counting.

The Dollar’s biggest trump card the yield advantage heading its way is seriously threatened now with many betting on the Fed staying put in this month’s meeting and the previously taken for granted rate of 4% at the end of the year is now in doubt. Oil prices continue to sky rocket having broken above $70 pb and the worse seems far from over and sadly we might be at the beginning of a fresh uptrend with prices having the potential to go towards a mammoth $100 pb that will make current prices look like a good deal. The unrelenting demand, refinery problems and geo political problems have been the catalyst for the spike in prices since start of the year and oil experts have been arguing of $100 pb price even before the hurricane struck and now it seems like a distinct unfortunate reality. It could very well be the case of survival of the fittest and most resilient to these oil price shocks and on the face of it, it does appear that U.S. would be hit the hardest but that may not necessarily be the case.

Lest start with the high performing but volatile economies of Asia, a good case study here is the Indonesian rupiah which has gone to its lowest level against the Greenback in four years as so far it is unable to deal with high oil prices. This has happened in spite of economy being on a reasonably strong footing but lack of clear and responsive protocols to deal with such shocks and given the great wealth divide within different sections of society as seen in all Asian countries is making it difficult to appropriately pass on cost to consumers. This is true for most Asian nations and unlike the U.S. they don’t have a good track record of coming out unscratched from such events.

Thus it is foolish to assume high oil prices and even the Hurricane Katrina are solely a U.S. problem while in reality it is a huge global conundrum. American growth forecasts have been lowered as a result, with the American consumer surely to curb its spending habits. Now it’s not just the U.S. that depends on its consumers but all other major economies of the world with the biggest threat to China. American consumers have rattled record level of debts to buy less expensive Chinese products but now their purchasing power could reduce. In spite of its recent impressive effort to reduce its dependence on exports and spur internal growth, exports still account for a sizeable chink of the GDP. Also lets not forget in spite of its tremendous progress and impending super power status, as of now China is still considered a third world nation. And the reason is very simple, lack of transparency and sophisticated economic systems in place which would make it extra hard to deal with any economic meltdown.

The commodity bloc along with the Pound is garnering support on its high yield but domestic demand is definitely slowing in these nations and expect a string of poor local data releases soon due to soaring oil prices and low global demand for products. This weakness should be witnessed in the Euro-zone’s data reflecting performance in August which is when Euro started appreciating again and oil prices started soaring. Any moves towards 1.30 in the current environment will have long term negative ramifications for the Zone.

The Yen is likely to pare back its recent losses on the crosses and could break key technical barriers against the Dollar as the latest polls show Prime Minister Koizumi is set to be reelected with an increased majority and interest for Japanese equities is growing by the day. The risks of course emanate from the heavy trade correlation of US-Japan-China and significant weakness in one section of the chain could set a transcending effect of economic slowness in all.

FOREX RelatedKey Economic Releases


Forex USA

Day GMT Release Previous Forecast Comment
Tuesday 14:00 August Non Manufacturing ISM 60.5 60.2 Services to stay around decent levels but downside risks remain.
Thursday 14:00 July wholesale Sales 0.6% 0.5% Sales to slip down with outlook along mixed lines
Thursday 14:00 July Consumer Credit 14.5Bn 9.8Bn Credit to decline eon rising interest rates.
Friday 12:30 August Export Price Index 0.1% -0.2% Export prices slip down on mixed demand


Forex Euro-Zone

Monday 08:00 August PMI Services 53.5 53.2 Services to stay around recent levels but outlook remain weak.
Monday 09:00 July Retail Sales m/m 0.4% -0.3% Sales to slip back in negative territory with consumer confidence staying low.
Tuesday 10:00 July German Factory Orders m/m 2.4% -0.5% Orders to fall sharply with oil prices crimping global demand.
Wednesday 10 00 July German Industrial Production 1.6% -0.4% Production to slip down as domestic demand fails to pick up.
Thursday 08:30 August Italian Business Confidence 86.0 85.5 Confidence to slip down on soaring oil prices.
Friday 06:45 July French Industrial Production 0.3% 0.3% Production to stay unchanged but outlook is negative.


Forex Japan

Tuesday 05:00 July Overall Household Spending m/m -1.2% -1.4% Spending remains weak as oil prices zoom higher.
Wednesday 05 00 July Leading Economic Index 63.6% 44.4% Economic index go slip back down in contraction territory.
Wednesday 23:50 August Money supply y/y 1.7% 1.7% Money supply to stay around recent steady levels.
Thursday 05:00 July Machine Orders m/m 11.1% -5.4% Orders to decline sharply on mixed domestic demand and global slowdown.


Forex U.K

Monday 08:30 August PMI Services 56.3 56.0 Should stay around recent levels with upside surprise likely.
Monday 23:00 August BRC Retail Sales -1.9% -0.5% Sales to continue its decline as consumer spending is failing to pick up.
Tuesday 08:30 July Industrial Production m/m 0.0% 0.1% Production to inch higher on good export demand
Thursday 11:00 BoE Interest Rate decision 4.5% 4.5% Rates to stay on hold on inflationary pressures
Friday 08:30 July Trade Balance -4.28Bn -4.7Bn Deficit to increase on high import costs of oil


Forex Australia

Tuesday 00:30 July Housing Finance -0.9% -1.0% Should stay around low levels but stabilization is seen.
Wednesday 00:30 Q2 GDP q/q 0.7% 0.9% GDP to inch higher after strong capex results and healthy export demand.
Thursday 00:30 August Unemployment Rate 5.0% 5.1% Labour seems to have topped out with corporation looking to cut costs.


FOREX (Foreign Exchange) TechnicalScenario

EUR/USD – The pair is buoyed after decisively breaking above 1.25 which sets the trend for a further up move but has immediate resistance in the 1.2610-25 zone with mild selling interest on its break above 1.26. A clearer break higher brings distant resistance around 1.2730 but due to recent gains might have too fast and a pullback is likely. Decent sized offers are littered in the 1.26 region which intensify above 1.2670. A clear break above 1.2730 raises hopes of a fresh uptrend towards 1.30 with lack of U.S. data this week would lead to direction driven by European data. On the downside, immediate support comes up around 1.2440 with mild bid interest on dips below 1.25. A decisive break below the support mark could accelerate losses before strong support exists around 1.2355. Mixed interest lies down till 1.2250 with only a break below to shift the sentiment back in the Dollar’s favour.


USD/JPY – The pair is close to breaking below the pivot support region of 108.90-109.10 which hasn’t been broken below for more than two months now. A break would encounter strong support around 108.45 decent bids lie around this mark which would make it very hard for the Yen to rally further. However a decisive break below would accelerate the Yen’s gains with next distant support lying in the 107.25-40 region. On the upside immediate resistance continues around 110.10 keeping in line with the recent range, very strong resistance lies in the 110.90-111.10 resistance zone. Any Dollar gains are likely to be capped here or by the 111.55 pivot mark which has heavy selling orders around it fro this pair. A decisive break below 107 sets the trend for a fresh down move to 105 with data outcomes eyed.


GBP/USD –The pair has skyrocketed by 600 points in the last 3 trading days which is excessive even by this pair’s usual exaggeratory standards. Many key resistance barriers were broken and no key resistance lies in the immediate price range but the sheer extent of its rally could lead to intra day exhaustion and a pullback is likely. The 1.84 region holds mixed interest with first line of support lying around 1.8390 and mild bid interest on any break below 1.84. Mixed interest is again seen down till 1.83 and patchy volatile moves are likely within these regions. Very strong support lies around 1.8275 with a clear break below needed to for the Dollar to have any chances to pare back its recent losses. On the upside, mild selling interest is seen around 1.8540 with distant resistance seen around 1.8630-50 region with a decisive break above opening the way for a move towards 1.90.


AUD/USD – The Australian Dollaris taking cue from other majors and is slowing inching higher and is currently placed precariously around 0.77 which has decent selling orders above it followed the very crucial resistance region of 0.7755-70 which has managed to hold well in recent times. Selling orders are lined all the way up to 0.78 with only a decisive break above this mark raising hopes of a fresh uptrend towards 0.80. On the downside immediate support lies around 0.7610 with mild bid interest seen on dips below 0.76. A clear break below brings into focus the pivot mark of 0.7555 which holds strong support. The apir would shift back in neutral territory if it breaks the bids lying below 0.75 and clears the 0.7475 support mark.


Kunal Sharma

Forex Analyst

Easy Forex Pty Ltd. (Australia)


E-mail: kunal@easy-forex.com

Start Trading Forex Online with Easy Forex!

Australian Financial Services License 246566


Data and information is provided for informational purposes only, and is not intended for trading purposes. Neither Easy Forex nor any of its data or content providersshall be liable for any errors or delays in the content, or for any actions taken in reliance thereon
.

Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

Back to weekly Archive

join THOUSANDS OF other people
who trade with easymarkets

Two minutes is all it takes.

You're almost there!

Finish your application and start trading today.

DON'T MISS A TRADING OPPORTUNITY

Two minutes is all it takes.