Australian FOREX Daily Oulook 08/09/2005

08/09/05 (02:00 GMT)

• Dollar continued to pare back its losses as current data sets still reveal the Pre Katrina steady economic conditions. While no one is in a position at this stage to ascertain the extent of damage the aftermath of this disaster would have on the economy in the long run, it is natural that prices and key sectors of the economy would be hit in the short term.For now the strength in the economy pre Katrina was confirmed in the Beige Book results while jury still out there in terms of the Fed’s next rate setting meeting. Their inflationary concerns were further confirmed yesterday with unit labor costs rising by most in the almost 5 years. Dollar was also helped by the decline in oil prices with key U.S. refineries resuming their normal operations.
  

• Euro has slipped further on the general rebound by the Greenback while lack of any strong fundamental factors from its own side to push higher as well as strong offers lined around 1.26 is making further gains hard to achieve for now. However data so far this week led by Germany has been above expectations which is lending a bit of support. Taking cue from yesterday’s factory orders, industrial production too rose much more than expected but this again was largely due to increase in export orders which is now threatened by a higher Euro. A further indication of how crucial it is for the Euro-Zone to maintain the recent rise in exports in light of sluggish domestic conditions was seen through the Italian Consumer Confidence survey which slipped to a 14 month low.

• Yen has gone back above 110 as traders are looking to adopt a semi neutral position ahead of Sunday’s elections in spite of the latest poll showing Koizumi being reelected with a wider margin. Leading economic index came bang in the middle of expansion and contraction territory while coincident index which measures the current state of the economy declined into contraction region with consumer sentiment which was already on the low side, has now slipped further on soaring oil prices. However the outlook is more promising and things from the outset are heading in the right direction for a steady recovery in the economy.
  

• Pound witnessed see-saw movements on conflicting data sets and the general rebound by the Dollar. The latest house price survey by a leading mortgage lender showed that house prices increased by their highest rate in a year which completely contradicts the survey recently conducted by the U.K.’s largest building society. Nonetheless recent data might have done enough for the Bank of England to keep rates on hold in today’s meeting. So far the last rate cut hasn’t helped in spurring consumer spending and another might be required in the near future. The Pound continues to slip on technical correction of its massive rally with further rate setting clues eyed from both sides of the Atlantic.

• Australian Dollar got a boost this morning by the unexpected rise in the employment data suggesting that recent promising data is not merely a flash in the pan but a steady momentum is being seen in current conditions. The unemployment rate remained at 29 year lows at 5% while jobs added were 32.7K against expectations of flat reading. This robust result could help spur consumer spending which has been the sore point for the economy. A clear decisive breakthrough is needed of offers lined up to 0.78 to raise hopes of a fresh uptrend.

FOREX Related Economic Data Released

FOREX Related Upcoming Economic Release

FOREX (Foreign Exchange)Key Price Levels

EUR/USD – Yesterday’s low was 1.2407 and high was 1.2538.
The pair closed at 1.2419.

The pair continues to ease back on profit taking as sentiment turns a bit less negative for the Dollar while offers continue to be strong on any move back above 1.25. Immediate support continues around 1.2375, a decisive break below the support is likely to accelerate its losses with very strong support coming up around 1.2315 with strong bid interest just below 1.23. Only a break below this mark would shift the pair in neutral territory with mild Dollar bias. On the upside mixed interest lies within the 1.24 region with resistance in the 1.2495-1.2510 region and selling interest on any break above it. Stronger resistance lies around 1.2575 with only a clear decisive break into the 1.26 region to raise hopes of further gains.

Key resistance is seen at 1.2510 followed by 1.2575 while support starts at 1.2375 followed by 1.2315.

USD/JPY – Yesterday’s low was 109.41 and high was 110.29.
The pair closed at 110.08.

The pair is back in its familiar 109-111 range which holds heavy mixed interest thus leading to patchy directionless moves which should continue. Mild immediate resistance now lies around 110.45 with mild offers lined above it followed by very strong resistance in the 111.05-20 region with strong offers lined around this region. Only a clear and decisive break above this region raises hopes of further Dollar gains. On the downside, support continues in the 108.95-109.10 region with decent sized bids lined just below it. Bids are lined down till 108.50 where very strong support lies and a break below is needed to raise hopes of a fresh Yen rally.

Key Resistance is seen at 110.45 followed by 111.05 while support starts at 109.10 followed by 108.50.

GBP/USD – Yesterday’s low was 1.8354 and high was 1.8461.
The pair closed at 1.8365.

The pair’s massive rally has exhausted and while for now it is remaining reasonably supported but it is prone to a sharp pull back with immediate support now moving down to 1.8325 with a break below likely to accelerate losses towards the very strong support mark of 1.8240 with decent bids around it. Below this mark mixed interest lies with next distant support around 1.81 with the pair to go back in neutral territory if so happens. On the upside, immediate resistance continues around 1.8475 with decent offers lying above 1.85 followed by very strong resistance around 1.8520. Any general turnaround by the Dollar would see the Pound slipping the most

Key Resistance is seen at 1.8475 followed by 1.8515 while support starts at 1.8325 followed by 1.8240.

AUD/USD – Yesterday’s low was 0.7651 and high was 0.7702.
The pair closed at 0.7668.

The Australian Dollaris at a pivotal stage hovering above 0.7650 with decent sized offers lying just above 0.77 and these offers increase in size above 0.7750 lined all the way up to 0.78 only a break above it raises hopes to reclaim the coveted 80 cent mark. Aussie’s high yield factor has now bumped up immediate support to the 0.7610 pivot mark with strong bottom picking bid interest to continue around 0.7555.

Key Resistance is seen at 0.7720 followed by 0.7775 while support starts at 0.7610 followed by 0.7555.

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