Australian FOREX Daily Outlook 16/09/2005

• Dollar managed to maintain its weekly gains with mixed U.S. data preventing any major breakouts on most majors. Yearly inflation figures had their biggest rise in 4 years with the core rate rising as well. The outlook is for inflationary pressures to rise further as yesterday’s data was pre hurricane and the spike in oil and energy prices that have followed since would be reflected in the coming months. NY state manufacturing index came in higher than consensus with the employment sub index inching higher while the hurricane had the effect of raising the price index. Jobless claims as expected zoomed higher to 398K with hurricane victims finally getting their chance to file claims with many more to follow suit in weeks to come. The exceptionally weak result in the Philly Fed index was too late in the day to have a significant impact on the Dollar but it does raise a few alarms with the National result expected to be on the weak side as well. Focus shifts to today’s Capital inflow data which is expected to stay on robust levels with appetite for U.S. assets staying strong.

• Euro found bottom picking support after briefly dipping below 1.22 on mixed U.S. data while from its own side each passing day is adding to the negative sentiment on the prospective outcome of the German elections. Current state of affairs point towards a hung parliament which could block any reform pans from both sides and could have a disastrous effect on the economy. The best result of course would be for opposition leader Merkel to win by a clear majority but that is the least likely scenario while Schroeder piping out another close victory doesn’t inspire much confidence given his track record of lack of economic reforms. Today’s inflation data from the zone would do little in changing the ECB’s stance of staying on hold in the foreseeable future.

• Yen is within its range but is finding it hard to make any significant gains with the economy continuing to project mixed signals leading to a general feeling of confusion in the market on the outlook for the economy which is being reflected in the price action. Leading economic index was revised down and it went back into contraction territory with the decline emanating from the weakness in the manufacturing sector. On a positive note, Consumer Confidence index rose slightly due to optimism for the employment sector.It is hoped that this optimism now translates to increased consumer spending which is very crucial to keep the economy on track in the current environment of mixed global demand. Meanwhile, Bank of Japan Governor Iwata is very optimistic of Japan getting out of its decade long deflationary spiral by early next year.

• Pound fell across the board as further signs pointed towards a definite need for a rate cut by the end of the year to spur consumer spending. But unfortunately for the economy it is stuck in a cyclical rut as current rising inflationary pressures would keep rates on hold while high oil prices are further stiffening the average high debt ridden consumer’s spending habits. Retail sales remained flat against expectations of an increase while previous month’s reading was revised down. For now the Pound is expected to find decent bottom picking bid interest within the 1.80 region.

• Australian Dollar has slipped back taking cue from the Euro and the Pound’s fall but continues to find good support and remains in a mixed interest region technically. Key commodities headed by copper and nickel have eased back as demand looks a bit mixed due to the heavy inventory build up. Slight uncertainty in regards to U.S. interest rates is helping the Aussie with its high yield, however any signs that suggest that the Fed wont be pausing could lead to a sell off in the Aussie.

FOREX (Foreign Exchange)Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2192 and high was 1.2274.
The pair closed at 1.2228.

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 has moved down to 1.2315 with offers having moved down 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 1.2315 followed by 1.2405 while support starts at 1.2180 followed by 1.2110.

USD/JPY – Yesterday’s low was 110.17 and high was 110.82.
The pair closed at 110.71.

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 now moved up to 110.95 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 109.75 followed by 108.95.

GBP/USD – Yesterday’s low was 1.8037 and high was 1.8229.
The pair closed at 1.8067.

The pair has slipped back further shifting it into neutral territory with mild bias for the Dollar, for decent bids are lined for the Pound within the 1.80 region. With strong support around 1.8020, however a clear decisive break below 1.80 would shift the Pound in negative territory and clear the way for further Dollar gains with distant support around 1.7910. On the upside, immediate resistance has moved down to 1.8190 with a break above bringing mixed technical interest and mild bias for the Dollar. Any prospective gains are expected to be now capped within the 1.83 region with very strong resistance around 1.8315.

Key Resistance is seen at 1.8190 followed by 1.8315 while support starts at 1.8020 followed by 1.7910.

AUD/USD – Yesterday’s low was 0.7653 and high was 0.7711.
The pair closed at 0.7666.

The Australian Dollarremains at a pivotal stage and has eased back below 0.77 but at the same time is finding good support around the 0.7645 mark. Any foray above 0.77 should continue to lead to selling interest with immediate resistance around 0.7735 and any break above 0.7755 to intensify the strength of the selling orders. On the downside a break below the support mark could accelerate losses before strong support is encountered in the 0.7595-0.7610 region with a clear break below to shift the momentum back in the Dollar’s favour.

Key Resistance is seen at 0.7735 followed by 0.7775 while support starts at 0.7645 followed by 0.7605.

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