Australian FOREX Daily Outlook 29/11/2005

MARKET SUMMARY – 29/11/05(03.00GMT)

• The Dollar slumped against the major currencies in European and US trade on Monday. With no major data releases, traders put the move down to order flows and a host of technical factors such as end of month profit-taking and speculative short-covering. On the data front, US existing home sales fell by 2.7% to a 7.09 million annual rate in October. Economist had tipped a decline to a 7.17 million annual rate in October. In the US later today, consumer confidence, durable goods orders and US housing sector activity are due. Consumer confidence is expected to post at 90.0, up from 85.0 in November. Durable goods are expected to come in at 1.2%. October new home sales forecasts centre on a 1.8% dip in the annual rate to 1.2 million.
  

• The Euro soared from lows of 1.1682 in the London session to a high of 1.1895 in the New York session. The strong likelihood of the European Central Bank raising interest rates on Thursday boosted the allure of short-term euro-denominated debt when set against the Bank of Japan’s zero interest rate policy. The Euro briefly hit 27-month highs against the yen and a two-year peak against sterling.
  

• The Japanese yen lifted from a 27-month low of JPY119.92 per US dollar, to highs of JPY118.34 late in the New York session. In the Asian session yesterday, Japan October retail sales came in weaker than expected, falling by 0.3% yoy versus market expectations of a 0.3% rise. Today Japan‘s unemployment rate rose to 4.5 percent in October, suggesting a slowdown in the job market. The figure was worse than the average forecast of economists, who had expected the jobless rate to hold steady at September’s level of 4.2 percent. Spending by households headed by a salaried worker rose 1.2 percent to 325,501 yen ($2,737), seasonally adjusted from September. The median estimate was for a 0.5 percent rise. Japan’s industrial production rose 0.6% in October from September. The rise was slightly smaller than expected by economists.
  

• The Pound traded against the dollar with a high of $1.7344 in the New York session after trading as low as $1.7049 in the London session. The market will focus on Mortgage approvals later today, which picked up in August and sustained this gain in September. This improvement has fed through to a slight pick up in house price growth in October.
  

• The Aussie dollar lifted from 0.7321 in London, to a high of 0.7450 in the New York session before closing at 0.7430. The Aussie hit 10-year lows against the New Zealand dollar at 1.0507. Tomorrow in Australia will see the release of retail sales, RBA credit aggregates, Q3 construction work done as well as the October merchandise imports numbers. The market expects retail sales to increase strongly by 0.5% in October. The market expects a solid rise of 0.9% in credit in October. October imports data will provide some further insights about the likely size of the October trade balance.

TECHNICAL COMMENTARY

• Euro – 1.1820

Volatile action from the 1.1644 Nov 14 trend low extended beyond last week’s 1.1856 high on Monday, opening the door toward the 1.1903 (Oct 3 low) to 1.1907 (50% retracement of 1.2170 to 1.1644). Only a move above this area would begin to put doubt in the ability of the short-term bear trend’s ability to eventually post a new trend low below 1.1644. Even then, only a move above the 1.1941 (trendline) to 1.1969 (61.8% of 1.2170 to 1.1644) band would begin to establish a short-term bull trend For now, short-term support is in the 1.1767 (61.8% retracement of the leg up from 1.1683 thus far) to 1.1743 (61.8% retracement of the gains from 1.1644 thus far).

• Yen – 119.40

For the uptrend to be put in doubt weakness is required minimally below the formerly resistant 118.39 high from Nov 7 and ideally below Nov 9’s 116.86 low would be necessary for confirmation that an interim top is in place. So the broad up-trend remains intact, with fresh upside beyond 119.57 seen as the catalyst for an extension towards 119.83, the high from Aug 19, 2003, then 120.73, the peak from Aug 1, 2003

• Pound – 1.7240

Monday’s new trend low in early action followed by a rise above Friday’s high has a key reversal day brewing on the daily chart. Subsequent follow-through above last week’s 1.7284 high opens the door towards resistance at 1.7365 to 1.7400 zones. Only a move above this heavy band would begin to establish a short-term bull trend. Initial support is in the 1.7161 (61.8% of the recovery from 1.7052 thus far) area, followed by the 1.7052 trend low from Monday.

• Aussie – 0.7400

The upswing from 0.7264 (Nov 14 low) staged a notable upward acceleration Monday, pushing through last week’s 0.7404 high and the 0.7443 low from Oct 19. Penetration there has the door open toward 0.7472, the 61.8% retracement of the 0.7601 to 0.7264 decline, with secondary resistance at 0.7521 (76.4% retracement of the same move). Only a break of support from 0.7336 (61.8% retracement of the gains from 0.7264 thus far) to 0.7325 (reaction low from yesterday) would reestablish the bear trend from 0.7762 (Sep 9 high).