Australian FOREX Daily Oulook 20/09/2005

• Dollar was all set to rally further after its initial gains in the Asian session with supporting factors such as uncertainty of German election outcome, China talking down Yuan revaluation in the near term, North Korea agreeing to give up its nuclear program as well as the Fed all set to raise interest rates to 3.75% in today’s meeting which should further attract the surge in private investors interest seen building in recent times. However it seems nature could have the final say with the storm brewing of the coast of Florida and forecasters have warned that it could turn into a Hurricane much stronger than Katrina with the potential to cause much more disruption to the oil rigs. Thus oil prices have zoomed higher but at least for today the focus is squarely on Fed’s decision (18:15 GMT).

• Euro managed to find good bid interest above 1.21 and has stabilized around 1.2150 with the spike in oil prices affecting the Dollar thus helping the Euro stay a bit supported but both main German parties remain deadlocked looking for coalitions to form the next government as uncertainty continues. With a time frame of around 30 days to form the new government, each side is expected to take up all that time with a fair bit of chop and change expected within the next few weeks with the Euro unlikely to rally significantly as a result. Today’s Economic sentiment survey from the zone as well as Germany is going to be caught between recent optimism coming from a boost in exports and current pessimism emanating from high oil prices and German elections.

• Yen remained confined to a very narrow range as expected with Japanese markets closed for holiday. And after its weakness on Friday the Yen has stabilized and is looking to retrace its losses with the country’s stock index Nikkei going above the 13000 mark for the first time in 4 years. The main catalyst for rise is the pick up in domestic conditions with the economy’s outlook in better shape compared to the global economy. The government expects a further increase in capital expenditure with corporates happy to pass on their profits. What remains to be seen is the effect of high oil prices on this recovery.

• Pound has stabilized above 1.80 with decent technical interest just below that mark as well as different House price surveys continue to project different directions for this market.But to be fair to these surveys, at the moment the housing sector is at a neutral stabilizing stage from which a clear conclusion cannot be reached. The latest survey from RICS showed that prices dropped to its slowest pace in a year. Lending figures released today would also show a rise helped by the recent rate cut but a substantial pick up in consumer spending is needed to prevent another rate cut.
  

• Australian Dollar is buoyed by metal prices soaring again with Gold going to its highest level in 17 years while the Commodity Research Bureau (CRB) index recording its biggest daily gain since the index was started in 1956 and needless to say all commodity bloc currencies gained as a result. The Aussie especially has had a very high correlation with Gold prices in recent years and any negatives emanating from the reduction in its yield advantage could be offset by continued surging in metal prices.

FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2100 and high was 1.2174.
The pair closed at 1.2146.

The pair is resonating within the 1.21 region which has mixed technical interest with mild bias for the Dollar. Immediate support comes around 1.2090 with decent bottom picking bid interest just below 1.21. A break below brings into focus very strong support around 1.20 but any move lower, would shift the Euro in deep negative territory and make it very hard for it to pare back its losses. On the upside, immediate mild resistance lies in the 1.2225-40 zone with mixed technical interest seen up to the 1.2315 mark which holds very strong resistance. Any gains for the Euro are expected to be capped within the 1.24 region with more losses likely.

Key resistance is seen at 1.2225 followed by 1.2315 while support starts at 1.2090 followed by 1.2000.

USD/JPY – Yesterday’s low was 111.17 and high was 111.66.
The pair closed at 111.54.

The pair has finally managed to break past its recent range with mild bias for the Dollar. Immediate resistance is seen around 111.80 with decent offers lined up on any break above 112. A clear break into the 112 region will bring into focus the very strong resistance region of 112.30-45 which is expected to hold firm. Any moves above it would shift the Yen in deep negative territory. On the downside immediate support has now moved down to 110.55 with strong bottom picking bid interest seen just below 110 followed by very strong support around 109.75

Key Resistance is seen at 111.80 followed by 112.30 while support starts at 110.55 followed by 109.75.

GBP/USD – Yesterday’s low was 1.7969 and high was 1.8063.
The pair closed at 1.8032.

The pair has slipped back further shifting it into neutral territory with mild bias for the Dollar, for now decent bids are lined for the Pound within the 1.80 region. With strong support around 1.80, 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 1.8110 with a break above bringing mixed technical interest and mild bias for the Dollar up to the 1.8240-55 region which holds decent resistance. 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 1.8110 followed by 1.8245 while support starts at 1.8000 followed by 1.7910.

AUD/USD – Yesterday’s low was 0.7614 and high was 0.7678.
The pair closed at 0.7670.

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 0.7635 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 0.7590-0.7610 region with a clear break below to shift the momentum back in the Dollar’s favour. While only a break above 0.78 raises hopes of a fresh uptrend towards 0.80 otherwise it should remain in narrow range trading.

Key Resistance is seen at 0.7735 followed by 0.7775 while support starts at 0.7635 followed by 0.7590.

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