Australian FOREX Daily Oulook 15/09/2005

• Dollar remained firm in spite of below par data largely due to key data from other regions were also a bit weak while political uncertainty in Germany is helping the Dollar by default. One of the main factors for the Dollar’s fall after the Hurricane was on the assertion that the Fed won’t be raising rates in next week’s meeting, however given the recent comments from Fed officials the market is now favoring a hike, thus leading to liquidation of Dollar shorts. Earlier, Retail sales declined more than expected but the report wasn’t as bad as the headline figure suggested as excluding autos, sales remained around its steady levels. Industrial production too came in a bit lower than expected with the Hurricane disrupting activity. Today’s Jobless claims data could balloon to a very high figure now that the Hurricane victims have had some time to file their claims.

• Euro has been sold aggressively after it managed to break back above 1.23 on mixed U.S. data. Given that the market expects the Dollar’s yield advantage over the Euro to increase further next week and political uncertainty to continue in Germany till the actual elections, thus any rally by the Euro becomes a good opportunity to sell and the market duly followed suit. Meanwhile, fundamentals in the Euro-Zone remain on the soft side with French Business sentiment declining with the main problem emanating from the sluggish manufacturing sector, which in the current environment of Euro staying above 1.20 beginning to lower exports again as well as high oil prices crimping global growth, would make it very difficult for this sector to pick up.

• Yen after briefly inching below 110 has pared back its gains on Dollar’s general rebound and another day of weak data is keeping it on the backfoot against the Dollar but weakness in Europe is helping it on its crosses. Japanese corporate bankruptcies increased while departmental store sales also declined more than expected. While this decline is shrugged off as a cyclical seasonal downturn, in the current environment of mixed global conditions, it is very important for Japanese domestic demand to maintain at steady levels to keep the economy on the recovery path.

• Pound has slipped back below 1.82 taking cue from the Euro as well as poor employment data gave another reason to take profits on its recent rally. Average earnings growth came in below expectations to its lowest result since more than a year thus easing any concerns about mounting wage pressures. While the number of people applying for jobless claims also rose for the seventh month running. Today’s Retail Sales data is eyed keenly and is expected to rebound primarily due to the recent rate cut which is thought to have increased spending. However a below par result would be a clear signal to Bank of England officials that another rate cut is definitely needed in the near future.

• Australian Dollar while slipping back on dollar’s general strength remains reasonably supported and is doing well on its crosses on comparatively much better fundamentals and a high yield advantage. Meanwhile, the New Zealand Central Bank kept rates on hold as in spite of concrete signs of slowing growth, current inflationary pressures don’t warrant a rate cut. But the bank’s Governor Bollard stated that the Kiwi Dollar is high and the nation’s current account deficit is unsustainable. Any foray above 0.71 for the Kiwi remains a sell opportunity.

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FOREX (Foreign Exchange)Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2264 and high was 1.2329.
The pair closed at 1.2274.

The pair is at a crucial juncture with key support levels having broken and mixed interest lies till the support mark at 1.2180 with decent bids just below 1.22. A clear break below this region could accelerate the Dollar’s gains and would shift the momentum back in its favour. Distant support is then seen around 1.2110 with decent bottom picking bid interest below 1.21 but the Euro would find it hard to retrace its losses at those levels. On the upside mild resistance continues has moved down to 1.2355 with offers having moved up as well and the 1.2390-1.2405 region holds very strong resistance. The 1.24 region is littered with strong offers and any gains are expected to be capped within that region.

Key resistance is seen at 1.2355 followed by 1.2415 while support starts at 1.2180 followed by 1.2110.

USD/JPY – Yesterday’s low was 109.88 and high was 110.70
The pair closed at 110.54.

The pair continues to remain within its familiar 109-111 range which holds heavy mixed interest thus leading to patchy directionless moves. Immediate support with decent bid interest has now moved back up to 109.75 while strong bids continue to lie below this region with very strong support maintaining around 108.90. This mark is crucial 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 111.25-40, which if breaks decisively, could shift the bias to the Dollar.

Key Resistance is seen at 110.95 followed by 111.40 while support starts at 109.10 followed by 108.45.

GBP/USD – Yesterday’s low was 1.8217 and high was 1.8301.
The pair closed at 1.8221.

The pair has lost more ground and risks further acceleration of losses before strong support is encountered at 1.8110, any moves lower from there would shift the momentum back in the Dollar’s favour and bring into focus the very strong support region of 1.8040-55. On the upside, immediate resistance lies around 1.8275 with the pair prone to exaggerated movements, upside looks capped around 1.8395 as selling orders are very strong above it. Any break higher into the 1.84 region should bring into focus strong selling orders which would be very hard to clear.

Key Resistance is seen at 1.8275 followed by 1.8395 while support starts at 1.8110 followed by 1.8110.

AUD/USD – Yesterday’s low was 0.7690 and high was 0.7735.
The pair closed at 0.7701.

TheAustralian Dollarremains at a pivotal stage having broken above 0.77 but not decisively and strong offers 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 raising 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 0.7790 while support starts at 0.7645 followed by 0.7610.

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