Australian FOREX Daily Outlook 30/11/2005

MARKET SUMMARY – 30/11/05(03.00GMT)

• The Dollar strengthened overnight against the major currencies. The catalyst for the move higher was much stronger than expected economic data out of the States. However, given the strength of the data one can argue that the dollar should have performed better. The data supports the view that the economy experienced only a temporary set back from the hurricanes, and is growing at a healthy pace. US consumer confidence rebounded strongly in November. It posted at 98.9, up from 85.2 in October and much stronger that the market expectations of 90.2. US durable goods orders rose 3.4% in October versus the market expectation of 1.5%. The US housing market continues to impress, with new home sales stronger than expected in October. They came in at a record high of 1,424k versus market expectations of 1,200k. Looking ahead in the US later today sees the release of US GDP and Chicago PMI. The market expects an upward revision to September quarter growth to 4.1%. The Chicago PMI is expected to come in at 60.0.
  

• The Euro traded down from a high of 1.1861 in the London session to a low of 1.1739 in New York, before closing at 1.1780. Strong economic data out of the States combined with softer than expected M3 data contributed to Euros decline. M3 growth moderated in October to just 8.0% from 8.4% the prior month and well below consensus of 8.6%. Eurozone HICP flash estimate is out later today with the market looking for the inflation rate to be unchanged at 2.5%.
  

• The Japanese yen weekend versus the dollar from JPY118.79 per US dollar to JPY 119.68 before closing at 119.50. Yesterday retail sales came in weaker than expected, falling by 0.3% yoy versus market expectations of a 0.3% rise. The Japanese yen has been undermined by loose monetary policy over the last few weeks, and now data support for this currency also seems to be slipping.
  

• The Pound traded down from a high of 1.7298 in the London session to a low of 1.7146 in New York, before closing at 1.7185. The data releases were mixed in the UK and therefore had little impact on the currency. There was further evidence of a pick-up in the housing market today as figures showed mortgage lending remained on a firm footing during October. Mortgage lending during October rose by 7.6 billion Sterling, above the 6-month average of 7.4 billion Sterling.
  

• The Aussie dollar fell from a high of 0.7410 in the London session to a low of 0.7375 in the New York session, before closing around 0.7385. Australian retail sales were in line with market expectations coming in at 0.5%.
  

TECHNICAL COMMENTARY

• Euro – 1.1790

Failure to breach resistance in front of the 1.1903 (Oct 3 low) to 1.1907 (50% retracement of 1.2170 to 1.1644) to 1.1915 (Oct 13 low) resistance cluster, kept the underlying bearish trend intact. Tuesday’s retracement of these gains violated support at 1.1767 (61.8% of 1.1683 to 1.1903) to 1.1743 (61.8% of 1.1644 to 1.1903). This opens the door for a look at 1.1683 reaction low and then the Nov 15 low at 1.1644. And below there, the next support is in the all-important 1.1588 area, which marked the 38.2% retracement of the massive 0.8232 to 1.3663 rally.

• Yen – 119.40

The move down from the new trend high at 119.93 may have posted a reversal day on the daily charts, but there was no follow-through below the critical 118.24 support. Only a break of this reaction low from last week would put the underlying bull trend on hold. Above the current 119.93 trend high and the nearby 120 psychological round number, there’s little resistance till the 1.2076 reaction high set back in July of 2003.

• Pound – 1.7190

Yesterday’s break to the lowest levels seen in two years and subsequent abrupt recovery beyond Nov 24’s 1.7288 peak completed a ‘bullish key reversal’, day. However, only a 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 – 0.7390

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).