Australian FOREX Daily Oulook 03/10/2005

03/10/05 (02:00 GMT)

• Dollar has rallied across the board breaking recent rigid technical barriers on the way in early Monday Asian session as mixed global economic conditions is making the prospect of high U.S. interest rates as a stand out factor. Earlier a volatile trading day was seen on Friday due to mixed U.S. data and position squaring which was larger than usual on Q3 end profit taking. Consumer confidence remained low with personal income declining to its lowest level since January while spending had the largest drop since November 2001. Needless to say oil prices are severely stiffening consumer spending habits and confidence is unlikely to pick up if prices remain supported and inch further up. On a positive note Chicago PMI rebounded strongly while the PCE deflator as well as the core reading both inched higher. Payrolls are back in focus this week with the reading expected to be negative for the first time in more than two years.
  

• Euro has finally broken clearly below recent strong support around 1.20 which further accelerated its losses and looks on a very shaky base at the moment. Earlier on Friday, French Consumer confidence as well as Q2 GDP remained on the weak side while German Retail Sales fell much more than expected. Inflation on the other hand came in higher than expected and well above the ECB’s target and they are expected to stay on hold well into next year while the Business Climate indicator was much stronger than expected as corporations continue to benefit from the strong rebound in exports due to a weaker Euro, but so far this optimism hasn’t passed on to the consumers who continue to reel from the spike in oil prices.

• Yen has declined to its lowest level in more than a year by breaking above 114 against the Dollar. Apart from the Dollar’s broad gains, this morning’s release of the important Tankan surveys showed business confidence rising less than expected. Economic conditions have improved in recent times while outlook looks very promising however all the good work seems to being undone by soaring oil prices for the world’s second largest importer of oil. Raw material prices are soaring cutting into corporate profits and the recent wage growth may not be maintained thus consumer confidence and spending could decline further. While it is a case of wait and watch the positives at the moment outweigh the negatives and the Yen should remain firm on its crosses.

• Pound was seen higher back above 1.77 on Friday mainly on profit taking but was sold aggressively around those levels which has continued today and it has eased back below 1.7550. For now it is being caught between definite signs of slow growth with consumer spending remaining sluggish and confidence declining further with latest Gfk survey showing that confidence remains around its worst levels since same time last year. However, housing market is showing signs of stabilization and like the Euro-Zone a weaker currency is helping boost exports while inflationary pressures persists. Thus BoE is likely to keep rates on hold this week but consumer spending needs to pick up soon to avoid a cut in the near future.

• Australian Dollar rallied strongly into the 0.76 region closing above it on Friday but has slipped on the general momentum in the Dollar’s favour. But its own fundamentals received another boost this morning with the manufacturing index coming back in expansion territory after three months also key commodity prices are inching higher and the uncertainty caused by high oil prices and resulting rise in global inflation is likely to lead to Gold prices to keep inching higher which is a key bullish factor for the Aussie. Cue is taken from Dollar’s general trend but the Aussie is likely to gain on its crosses

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FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Friday’s low was 1.1996 and high was 1.2090.
The pair closed at 1.2024.

The pair’s losses have accelerated after strong support around 1.20 was broken decisively and it has gone towards 1.1940 with next immediate support coming up around 1.1910 followed by very strong support in the 1.1850-65 region which has decent bids around it and 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 1.2025 with selling orders lined up above it lined up to the very strong resistance region of 1.2075-90.

Key resistance is seen at 1.2025 followed by 1.2090 while support starts at 1.1910 followed by 1.1850.

USD/JPY – Friday’s low was 112.91 and high was 113.67.

The pair closed at 113.47.

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. But while key pivot levels are at 114.40 and 115.05, traditional resistance is seen at a distant 116 if the pivot levels are broken. 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 resistance 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 – Friday’s low was 1.7565 and high was 1.7731.
The pair closed at 1.7638.

The pair continues to break down with more support levels breached and looks vulnerable for further losses. Immediate support is seen at 1.7490 followed by very strong support in the 1.7425-40 region. Quick losses could help the Pound stabilize on profit taking but immediate resistance has moved down to 1.7595 followed by very strong resistance and strong selling orders lined above the 1.7655 mark. While the pair is prone to exaggerated movements 1.73 is the crucial level as a break below it will send it towards its lowest level in two years.

Key Resistance is seen at 1.7595 followed by 1.7655 while support starts at 1.7490 followed by 1.7425.

AUD/USD – Friday’s low was 0.7587 and high was 0.7642.
The pair closed at 0.7617.

The Australian Dollaris locked between conflicting fundamental factors but mild bids continue to linger within the 0.75 region with immediate support around 0.7545 with a break below likely to accelerate losses towards the 0.7470-85 region which holds very strong support and expected to cap any losses in the near term.On the upside, immediate resistance lies around 0.7625 with selling orders lying above this mark lined all the way up to 0.77 where resistance is very strong.

Key Resistance is seen at 0.7625 followed by 0.7705 while support starts at 0.7545 followed by 0.7480.

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