Australian FOREX Daily Oulook 05/10/2005

• Dollar remained largely unchanged and held onto its gains and for now its price action is caught between positives emanating from data and hawkish Fed tone compared to mild profit taking around these crucial technical levels which is stiffening further Dollar gains. President of Dallas Fed stated that Inflation is at the high end of the Fed’s comfort zone while Santomero as well as Poole both asserted that the Fed will have to keep raising rates. Earlier Factory orders came above expectations with orders for Durable Goods rising as well. On another positive note, Oil &amp energy prices eased back further as the U.S. is ready to tap into their emergency reserves. Today’s Services ISM is expected show the effects of the hurricane but should remain around steady levels.

• Euro continues to find decent bid interest around 1.19 but at the same time no significant upside rally can be seen in the current scenario. After Schroeder’s comments hinting at stepping down to make for a government, his party officials quickly dismissed this stating that he will not be stepping down and with the opposition party headed by Merkel unlikely to back down as well, uncertainty persist around the eventual outcome. Earlier Producer’s inflation rose on the back of high oil and energy prices while the Unemployment rate in the Zone inched higher which further reduces the chances of beleaguered consumers to increase spending that are already battling high oil prices.

• Yen has broken back below the 114 mark with its recent losses, in spite of improved fundamentals, might have been too quick and mild position adjustment is being seen. It was also helped by comments from BoJ member Haru who stated that it is possible for deflationary conditions to end soon and subsequently the change of the current policy framework could take place early next year. Earlier, monetary base expanded to its highest rate of annualized growth since June this year. But the factors working against the Yen at the moment are consumer spending affected by high oil prices while its zero interest rates continue to make seem less attractive among other high yielders

• Pound has stabilized going back above the 1.76 mark after continuing to find decent bottom picking interest on moves below 1.7550. While this consolidation is natural given the recent sharp fall, like the Euro any significant upside for the Pound looks unlikely. Construction PMI came slightly below expectations and while it stays in the expansionary region for the 46^th consecutive month, the report had inherent weaknesses with housing sub index close to slipping into contraction area. Also a survey by Nationwide Building society found that consumer confidence has plunged to its lowest levels since it started the survey 17 months ago.

• Australian Dollar has eased back and is hovering around the 0.76 mark after Reserve Bank of Australia left rates on hold. While this was widely expected, some quarters had built positions in hope of a hike given the recent increase in inflationary pressures and steady growth which have now been liquidated. The Aussie could fall further after this morning’s data showed Building Approvals falling to its lowest level since 2001. But given the current conflicting conditions rates are expected to stay on hold well into next year

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FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.1905 and high was 1.1945.
The pair closed at 1.1918.

The pair remains locked in narrow range bound movements with decent bottom picking bid interest just below 1.19 and immediate support coming up around 1.1890. A clear break below brings into focus the very strong support in the crucial 1.1850-65 region which has decent bids around it but a break below will send it to its lowest levels in two years and losses will accelerate further. On the upside, immediate resistance has now moved down to 1.1975 with selling orders lined up above it lined up to the very strong resistance region of 1.2025-50.

Key resistance is seen at 1.1975 followed by 1.2025 while support starts at 1.1910 followed by 1.1850.

USD/JPY – Yesterday’s low was 113.99 and high was 114.39.

The pair closed at 114.30.

The Yen has gone towards its lowest level in more than a year with strong resistance around 114 broken. Further gains from here on for the Dollar might be patchy and could be stiffened on profit taking with key pivot resistance levels lying at 114.40 and 115.05. On the downside, immediate support has now moved up to 113.40 with mild bid interest around it and a break below brings stronger bids just below 113 with very strong support at 112.90.

Key Resistance is seen at 114.40 followed by 115.05 while support starts at 113.40 followed by 112.90.

GBP/USD – Yesterday’s low was 1.7534 and high was 1.7622.
The pair closed at 1.7586.

The pair continues to break down with more support levels breached and looks vulnerable for further losses but decent bid interest is being seen just below 1.7550 and profit taking could send it towards immediate resistance around 1.7655. Mild offers lie above it lined up to the very strong resistance region at 1.7710-25 with only a break above this region to shift the pair back in neutral territory with mild Dollar bias. If the bids around 1.75 are broken clearly and then further losses could accelerate.

Key Resistance is seen at 1.7655 followed by 1.7715 while support starts at 1.7520 followed by 1.7470.

AUD/USD – Yesterday’s low was 0.7615 and high was 0.7645.
The pair closed at 0.7629.

The Australian Dollaris locked between conflicting fundamental factors but mild bids continue to linger just below 0.76 with immediate support around 0.7575 with a break below likely to accelerate losses towards the 0.7520-35 region which holds very strong support and expected to cap any losses in the near term.On the upside, immediate resistance lies around 0.7645 with selling orders lying above this mark lined all the way up to 0.77 where resistance is very strong. Data outcomes are eyed from both sides.

Key Resistance is seen at 0.7645 followed by 0.7705 while support starts at 0.7575 followed by 0.7520.

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