Australian FOREX Daily Oulook 11/11/2005

MARKET SUMMARY – 11/11/05(03.00GMT)

• The Dollar was moderately stronger against the major currencies overnight, despite a record trade deficit.The dollars reaction to the record deficit is testament to the markets bullish views of relative interest rates and growth advantages in the States. The gap between imports and exports widened to $66.1 billion from $59.35 billion in August. Economists had expected a deficit of $61 billion in September. The rise was attributed to high oil prices. The University of Michigan consumer confidence index rose strongly to 79.9 in September from 74.2 in October, Wall Street had expected 76. Sentiment rose primarily because of lower fuel prices. Looking ahead, and the US is commemorates Veterans Day today which will see the domestic markets closed.
  

• The Euro was changing hands at $1.1685 at the close of the New York session. The euro had gained to $1.1779 after the trade report. A large bulk of today’s European data came out of France, its third largest economy. French GDP rose more than expected as well, by 0.7 percent in the third quarter, the most in over a year, versus 0.1 percent in the second quarter. CPI for October was reported up 1.8% y/y, quite a bit below the 2.1% consensus.
  

• The Japanese yen traded lower against the dollar, opening at JPY117.77 per US dollar before ending New York trade near JPY118.20. Third quarter GDP was out earlier today and rose by 0.4% q/q, which was slightly stronger than consensus. This data is not sufficiently strong enough to expect Japanese investors to favor Japanese over foreign asset, and therefore is not currency positive.
  

• The Pound hit an eight-week high against the Euro after the Bank of England (BOE) left interest rates unchanged at 4.5% for the 3rd month running. The market was expecting no change in interest rates by the BOE. The Pound strengthened to 1.7490 after the announcement, but could not hold onto its gain and closed in New York around 1.7440.
  

• The Aussie dollar traded down from 0.7335 and closed near its lows of 0.7300 in the New York session. The Aussie heavy tone was caused both by dollar strength and poor Australian economic data (Employment) released yesterday.
  

TECHNICAL COMMENTARY

• Euro – 1.1695

Euro traded through previous low of 1.1709 and this suggests further scope for the downside. The next support level is seen at1.1588, the 38.2% retracement of the 0.8227 to 1.3663 advance. On the topside 1.1710 will offer minor resistance but major resistance is still located between 1.1833 high and the formerly supportive 1.1867 level.

• Yen – 117.65

USD/JPY continues to consolidate between 117.00 and 118.20. However sentiment remains positive with a possible retest of 118.43, with a break of this level seen as the catalyst for an extension towards the psychological 120 level (and area of Aug 19, 2003 peak at 119.83).

• Pound – 1.7425

Minor resistance is located at 1.7519, with more important resistance located at 1.7683 (the 61.8% retracement of the 1.7904 to 1.7326 decline). Initial support is located at Oct 12’s 1.7391 low with major support at the years low of 1.7271.

• Aussie – 0.7325

Aussie rejected the 0.7375 resistance level (previous support &amp low for the year). However for renewed weakness a break of 0.7284 is required to signal a broader decline towards 0.7238, the 61.8% retracement of the 0.6773 to 0.7590 advance. Topside resistance is located at 0.7375, followed by 0.7420.