Australian FOREX Daily Oulook 14/09/2005

14/09/05 (04:00 GMT)

• Dollar maintained its gains thanks to an unexpected improvement in the Trade Balance data with the deficit decreasing, however since the data was from July it neither reflects the high import costs of oil nor the costs of the Hurricane, thus data in the next few months would be keenly eyed and more reflective of recent events. There were positives of course, with exports rising to record levels due to healthy demand from emerging nations for American products. Producer’s inflation came in lower than expected due to cost cutting at the top of the profit chain as we have started witnessing a slight decline in demand for oil. Today’s focus shifts to Retail sales which is expected to fall back but it could be offset by a healthy result expected in the Industrial Production data with exports as well as domestic demand remaining firm.

• Euro is hovering around 1.23 after weakening earlier as the anticipation of key U.S. data is making the market adopt a neutral position. But the Euro from its own fundamentals has limited factors to drive it higher and political uncertainty in Germany is further blocking prospective gains. Earlier French Trade Deficit came in much higher than expected widening to its highest level in 7 months. Unlike its German counterparts, France is not witnessing a steady rise in exports while high oil prices continue to increase the import costs. Also German producers are happy to cut their profit margins and pass on fewer costs to consumers whose inflation remained tame but French consumer inflation surged higher which would further stiffen domestic spending.

• Yen has pared back its post Koizumi reelection gains as a lower than expected result in Industrial Production weighed in against it. High oil and energy prices are affecting manufacturing spending as well as consumer demand but the outlook is a bit more promising. Increase in foreign demand for Japanese assets is continuing which should soon translate to improved domestic conditions and consumer confidence. Earlier minutes of Bank of Japan’s policy meeting revealed that two members once again voted to lower the liquidity target for banks but rejected by the other 9 members. For now the pair is strongly maintaining its 109-111 range.

• Pound has found good bottom picking support below 1.82 and has managed to pare back some of its losses as consumer inflation hit its highest level in 8 years. With inflation staying above the Bank of England’s target, interest rates are unlikely to be cut in the current environment with high oil prices the main catalyst. Being mindful of the harmful effects of these high oil prices on the already beleaguered consumer spending sector, Chancellor Brown urged OPEC to approve a rise in production to bring prices down. While given that manufacturers are cutting their costs and profit margins, today’s employment data is not expected to show any improvement.
  

• Australian Dollar is stuck between heavy selling orders within the 0.77 region and last week’s robust data lending equally good support, remained confined to narrow movements. While it is staying above 0.77 for now, the lowest reading in the Consumer Confidence index in more than two years will add further doubts to any upside moves. This result also goes to show countries like Australia have a lesser resilience power to these oil price spikes than the U.S. where consumers still have to pay less for fuel.

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FOREX (Foreign Exchange)Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2252 and high was 1.2316.
The pair closed at 1.2285.

The pair eased back further but is back in neutral territory hovering around 1.23 with immediate support continuing in the 1.2240-55 region followed by decent bid interest just below it. A clear break below could accelerate losses before strong support around 1.2180 emerges with decent bid interest lined down till 1.2150. This is region is crucial and a clear and decisive break by the Dollar would shift back momentum in its favour and augurs well for further gains. On the upside strong resistance continues 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 1.2240 followed by 1.2180.

USD/JPY – Yesterday’s low was 110.12 and high was 111.04
The pair closed at 110.65.

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. Strong 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 has moved up to 110.75 with mixed interest continuing up till the strong resistance region of 111.05-20, which if breaks decisively, could shift the bias to the Dollar.

Key Resistance is seen at 110.75 followed by 111.25 while support starts at 109.10 followed by 108.45.

GBP/USD – Yesterday’s low was 1.8181 and high was 1.8250.
The pair closed at 1.8233.

The pair for now is finding bottom picking bid interest below 1.82 with mild resistance in the 1.8170-85 region. A clear break below this region could accelerate losses before strong resistance is encountered at 1.8110, any moves lower from there would 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 1.8170 followed by 1.8110.

AUD/USD – Yesterday’s low was 0.7670 and high was 0.7708.
The pair closed at 0.7698.

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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