Australian FOREX Daily Oulook 09/09/2005

09/09/05 (02:00 GMT)

• Dollar remained confined to indecisive narrow range bound movements as the market remains unsure of the Fed’s rate decision in their meeting on September 20^th.Fed member Moskow was relatively hawkish post Katrina as he remained concerned by rising inflationary pressures which need to be countered by appropriate rate increases.But given the intense negative sentiment that is emanated from the slow relief efforts, political pressure could prevent the Fed from going ahead with the hike but for now the odds are in favour of a hike.Jobless claims remained around recent levels but once the hurricane affected victims get a chance to file their claims it would be interesting to see the employment figures. Consumer credit declined more than expected as apart from high interest rates, the high level of accumulated debt is also weighing in on the average consumer.

• Euro for now is primarily directed by position adjustments in relation to the Hurricane Katrina as the market recovers from the initial shock and starts to focus on the fundamentals again. In line with other data released from the zone this week, data was positive again, and in spite of the high import costs of Oil, German trade surplus remained around steady levels thanks to another rise in exports. Also Italian Business Confidence unexpectedly increased instead of a decline again the main catalyst being the recent rise in exports. This rise in exports seen across the zone has largely come about due to the decline in the Euro in last few months, thus the current price levels are very crucial.

• Yen has slipped further as the negatives emanating from high oil prices to the second largest importer of oil are finally reflecting in the price action of the Yen. Machine orders slipped down due to weak new orders after last month’s surge. General rebound by the Greenback as well as a bit of nerves ahead of the elections on Sunday is also leading to a bit of profit taking. The fact that trade surplus is bound to shrink in the current environment of high import costs of oil is also weighing in against the Yen. But Bank of Japan officials remain optimistic on the outlook for the economy and are confident that consumer spending will pick up. It continues to resonate within its range with decisive moves eyed next week on the crosses as well.
  

• Pound has slipped back mainly due to Dollar’s general rebound while the conflicting views on the direction of U.K. interest rates is adding to patchy trading in the Pound. Bank of England kept rates on hold in line with expectations as their main concern at the moment is rising inflation which has already breached the bank’s target. Recent signs of stabilization, after earlier decline, seen in key sectors of the economy also added to the case for staying on hold for now. However the fact remains that a rate cut is needed to spur consumer spending which remains weak and the chorus of a demand for a rate cut is increasing among key business bodies. Today’s trade balance data is expected to show a rise in deficit with the Pound running out of factors to keep pushing it higher.

• Australian Dollar remains buoyed by upside surprises in the data this week as well rising commodity prices with Gold prices having gone to its highest level this year and the Aussie is one of the best performing currencies this week with impressive gains on its crosses as well. The robust data releases could have eliminated the slight chances of a rate cut that could have eventuated on slow domestic conditions while uncertainty surrounding the U.S. interest rates means that its yield advantage is maintained. However gains could be stiffened due to strong technical resistance within the 0.77 region.

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FOREX (Foreign Exchange)Key Price Levels

EUR/USD – Yesterday’s low was 1.2383 and high was 1.2452.
The pair closed at 1.2406.

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 lies in the 1.2350-65 zone with a decisive break below the support is likely to accelerate its losses with very strong support coming up around 1.2295 with decent 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 immediate resistance around the 1.2475 mark and decent offers lying above 1.25 and strong resistance around 1.2545.

Key resistance is seen at 1.2475 followed by 1.2545 while support starts at 1.2350 followed by 1.2295.

USD/JPY – Yesterday’s low was 110.04 and high was 110.62.
The pair closed at 110.46.

The pair is back in its familiar 109-111 range which holds heavy mixed interest thus leading to patchy directionless moves which should continue. But it has gone towards the upper end of its recent range with strong resistance around 111 and decent offers lying above it. A clear break would shift the Yen in negative territory and could lead to further losses if 111.55 is decisively broken above. On the downside mild support has moved down to 109.75 with dollar bids lined down till 109 where very strong support lies.

Key Resistance is seen at 111.05 followed by 111.55 while support starts at 109.75 followed by 109.05.

GBP/USD – Yesterday’s low was 1.8330 and high was 1.8442.
The pair closed at 1.8377.

The pair’s massive rally has exhausted and while for now it is remains mildly supported but it is prone to a sharp pull back with immediate support now moving down to around 1.83 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 has moved down to 1.8440 with very strong resistance lying around 1.8515 and offers remain strong on any break above 1.85.

Key Resistance is seen at 1.8440 followed by 1.8515 while support starts at 1.8305 followed by 1.8240.

AUD/USD – Yesterday’s low was 0.7660 and high was 0.7733.
The pair closed at 0.7716.

The Australian Dollarremains at a pivotal stage having broken immediate resistance around 0.7720 but not decisively and strong offers remain within the 0.77 region laced all the way up to 0.78 with only a clear break above it raises hopes to reclaim the coveted 80 cent mark. Immediate resistance lies around 0.7755 followed by very strong resistance in the 0.7790-0.7805 region which is expected to hold well. Aussie’s high yield factor has led to the support inching higher to 0.7640 followed by decent bottom picking bid interest around 0.7575.

Key Resistance is seen at 0.7755 followed by 0.7795 while support starts at 0.7645 followed by 0.7575.

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