Australian FOREX Daily Outlook 5/12/2005

December 6, 2005

MARKET SUMMARY – 05/12/05(03.00GMT)

  • The Dollar was largely unchanged against the Euro and Yen in Friday’s London and New York session. The greenback finished lower versus the high yielding currencies. US non-farm payrolls were in line with market expectations. They posted at 210k in November following weakness in September and October on the back of the US hurricanes. The bounce back confirms the underlying strength of the US labour market. The unemployment rate was steady at 5%. Fed Chairman Greenspan was upbeat on economic growth in a speech on Friday, although Fed Yellen reminded the markets that the FOMC intends to change the language of the FOMC statement. The US ISM non-manufacturing index is released later today in the States. The market expects a small fall in November to 59.3. At this level it would remain well above the crucial 50 level which indicates expansion in the sector.

  • The Euro traded in a range of 1.1663 to 1.1748, before settling near 1.1710 at New York close. ECB President Trichet defended last week’s rate rise indicating that households want price stability. Politicians in the Euroland group have been quick to indicate that the ECB is stifling growth. Euroland ministers at the G7 meeting still show extreme reluctance to tolerate any moves to significant labour or goods market deregulation that would lift growth. In the Eurozone the PMI services is released later today. This has established itself in healthy expansion territory recently and little change in that position is forecast.

  • The Japanese yen hit a two and a half year low as traded to JPY121.19 per US dollar from JPY120.24 earlier in the session. The Japanese yen closed the New York session near JPY120.90. Developments at the G7 over the weekend had further undermined the Japanese yen with Finance Minister Tanigaki appearing non – perturbed over the week yen.

  • The Pound followed the Euro and traded up to 1.7377 earlier in the session, before the non-farm payrolls was released and the pound traded back down to a low of 1.7251. The Pound closed the New York session around 1.7310. In the UK, the PMI is released later today and is expected to slip in line with the perception that the pace of GDP growth has slowed recently. The market median forecast is at 55.0 for November.

  • The Aussie dollar rose from 0.7420 to 0.7489, ending the New York session near 0.7470. Aussie continues to benefit from base metal prices hitting new highs.

TECHNICAL COMMENTARY

  • Euro – 1.1690

First support is the Nov 28 reaction low at 1.1683. A break this opens the door for 1.1588 (38.2% retracement of the massive 0.8232 to 1.3663 rally). Any near-term recoveries will struggle at 1.1801 (top of congestion from Tuesday) to 1.1812 (61.8% retracement since Monday’s 1.1903 high) resistance zone.

  • Yen – 121.40

The bull trend remains intact, having conquered the 120.76 (July 30, 2003 reaction high) resistance, the next barrier for this bull trend is 121.89 (March 31, 2003 reaction high). Mild support is in the 120.00 (61.8% since the 119.26 reaction low) to 119.93 (Monday’s high) area, but only a move below Wednesday’s 119.26 reaction low would put the bull trend on hold.

  • Pound – 1.7295

Sterling recovery from 1.7048 low looks promising however for further upside the market must breach 1.7342 which opens the door for 1.7476. A relapse below 1.7048 would be necessary to undermine the developing positive tone and instead reinstate the broader decline.

  • Aussie – 0.7460

Continued progress within the neatly formed bull channel from 0.7264 has taken this pair above resistance at 0.7472, the 61.8% retracement of the 0.7601 (Oct 27 high) to 0.7264 (Nov 14 low) decline. There’s a small resistance at 0.7521-the 76.4% retracement the same decline-but the next big resistance area for this recovery runs from 0.7572 (61.8% of 0.7762 to 0.7264) to 0.7601 (Oct 27 reaction high). Initial support at Nov 30’s 0.7371 low, but weakness below Monday’s 0.7320 low is required to undermine this bullish run.

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