Australian FOREX Daily Oulook 13/09/2005

13/09/05 (04:00 GMT)

• Dollar rallied across the board as the market’s theme of taking profits on its shorts persisted and most majors are in a neutral level as they ready themselves for a barrage of key U.S. data starting with Trade Balance and PPI today. Yesterday price action was a natural compensation for the exaggerated losses in the Dollar post Hurricane Katrina. Oil prices eased back slightly as first concrete signs of dampening demand are being witnessed. While this week’s data has the potential for further Dollar losses, its main supporting factor i.e. interest rates is keeping it well supported with post hurricane comments from Fed officials suggesting that they are likely to go ahead with the rate hike in next week’s meeting. Any result above $60 bn in the deficit outcome today could lead to a Dollar sell off.
  

• Euro slipped back below 1.23 as well as weakened on its crosses with political concerns emanating from the prospective outcome of German elections adding to the uncertainty. Latest polls show that the reform minded opposition leader Angela Merkel has lost her lead with Chancellor Schroeder catching up in the past week. Current conditions are pointing towards a hung parliament with even chances of Schroeder crossing the line with a slender margin even as displeasure over his economic policies grow by the day. Consumer Inflation data from Germany and France are likely to show that producers are still reluctant to pass on their high costs.
  

• Yen after rallying initially on the euphoria of Koizumi being reelected by a landslide margin pared back its gains on Dollar’s general rebound and continues to resonate between its recent 109-111 range. With data coming above expectations its losses look capped within the range as concrete signs of healthy domestic spending and capital expenditure by corporates is maintaining the optimism for the outlook of the economy.Industrial production and capacity utilization is eyed today, with the inability of the beleaguered manufacturing sector to pick up, being one of the sore points for the economy.
  

• Pound fell by more than 200 points as apart from the general rebound by the Dollar, tame producer inflation figures triggered a bout of profit taking which was always in the offing after the Pound had rallied by 600 points in the first few days of this month. The fall in inflation suggests manufacturers are bearing the brunt of the costs which could lead to their cost cutting and does not bode well for the labour market which is already in a sluggish state. The focus shifts to consumer inflation which is expected to remain higher than the BoE’s target but is also subjected to downside risks as producers are well aware of the high level of debt faced by consumers.
  

• Australian Dollar taking cue from other majors has slipped back below 0.77 as in spite of its fundamentals outshining the rest, technical resistance and selling orders lined up to 0.78 are stiffening further gains. While current conditions seem very attractive, the outlook of the economy is a matter of concern with Australian business sentiment remaining on the low side as consumer spending fails to grow. A report from IMF stated that Australian economic growth is likely to slow this year with a declining housing market also a matter of concern.

FOREX Related Upcoming Economic Release

FOREX (Foreign Exchange)Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2270 and high was 1.2415.
The pair closed at 1.2296.

The pair has eased back further and has now shifted in neutral territory with mild bottom picking bid interest around 1.2275 followed by decent support in the 1.2240-55 region A clear break below could accelerate its losses before very strong support comes up at the 1.2180 mark which is expected to hold well. On the upside, political concerns are stiffening gains with strong resistance in the 1.2390-1.2405 region with mild offers lined above 1.2350. Resistance is stronger as we go into the 1.24 region with the 1.2475 mark expected to cap any gains.

Key resistance is seen at 1.2390 followed by 1.2475 while support starts at 1.2255 followed by 1.2180.

USD/JPY – Yesterday’s low was 109.18 and high was 110.38.
The pair closed at 110.20.

The pair remains within its familiar 109-111 range which holds heavy mixed interest thus leading to patchy directionless moves. Immediate support with decent bid interest continues to lie within the 108.90-109.05 region. Bids continue to lie below this region with very strong support maintaining around 108.50. This mark is crucial which has held well for nearly 3 months and a clear break below will accelerate the pair’s losses and shift the Dollar into negative territory. On the upside, immediate mild resistance lies around 110.55 with mixed interest continuing up till the strong resistance region of 111.05-20, which if breaks, could shift the bias to the Dollar.

Key Resistance is seen at 110.55 followed by 111.15 while support starts at 108.90 followed by 108.45.

GBP/USD – Yesterday’s low was 1.8182 and high was 1.8426.
The pair closed at 1.8214.

The pair has finally broken from recent ranges and lack of any upside factors leading to profit taking and break of key intra day support levels. Bottom picking bid interest is continuing just below 1.82 but mixed interest lies till 1.81 before strong support comes up in the 1.8090-1.8105 region. A break below will accelerate its losses before very strong support lies around 1.80 with any move lower to shift the momentum back in the Dollar’s favour. On the upside, immediate resistance lies around 1.8315 with the pair prone to exaggerated movements, upside looks capped around 1.84 as selling orders are very strong above it.

Key Resistance is seen at 1.8315 followed by 1.8405 while support starts at 1.8110 followed by 1.8040.

AUD/USD – Yesterday’s low was 0.7680 and high was 0.7763.
The pair closed at 0.7693.

The Australian Dollarremains at a pivotal stage having broken above 0.77 but not decisively and strong offers remain within the 0.77 region has seen it pull back. These strong offers are 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 0.7640-55 region followed by decent bottom picking bid interest around 0.7610.

Key Resistance is seen at 0.7755 followed by 0.7810 while support starts at 0.7645 followed by 0.7610.

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