Australian FOREX Daily Oulook 04/10/2005

04/10/05 (03:00 GMT)

• Dollar has held firm after its rally in the Asian session on Monday with momentum squarely in its favour. A much better than expected result in the ISM Manufacturing index acted as an icing on the cake with inherent strengths in the report as price index soared while employment index inched higher also Construction spending rose to around record levels. So far every inflation indicator is pointing towards inflationary pressures building giving credence to the hawkish tone of Fed officials. Corporate repartition flows as well as Q4 portfolio allocation chasing the high yield is supporting the Greenback. Oil prices have eased back with the U.S. announcing that they are ready to tap into the emergency reserves to counter any increased demand for winter fuel. Some degree of profit taking could stiffen Dollar’s gains but positive sentiment towards it, is increasing by the day.
  

• Euro for now, seems to have found decent bottom picking bid interest around 1.19 while the impasse over the start of Turkey’s membership talks to join the EU seem to be over with Austria withdrawing its objection. Meanwhile in Germany, opposition leader Merkel’s party won a key vote while Schroeder hinted at stepping down to make way for a coalition government to be formed. Data was positive as manufacturing continues to benefit from the surge in export orders and the index remained in expansionary territory. Given the recent improvement in data, formation of a government in Germany could lead to a relief rally for the Euro but it is likely to be short lived.

• Yen could stabilize on the general assertion that its recent losses against the Greenback may have been in too quick a time frame. While the Tankan surveys did come below consensus, the outcome was still a strong one with the Yen gaining against European currencies. BoJ Gov Fukui’s comments also put the Yen under some pressure after he dampened recent enthusiasm of a prospect of a change in the monetary policy due to recent comments from other BoJ members. He stated that he would only consider a change if core consumer prices show a sustained year on year change.

• Pound like the Euro has stabilized after finding bottom picking bids around 1.75 and was also helped by the Manufacturing PMI inching higher. The rise was largely due to the surge in export orders on pick up in global demand with a weaker Pound likely to lead to further increase in demand. While sluggish domestic conditions remain a matter of concern, Bank of England is all set to stay on hold in Thursday’s meeting as inflationary pressures are building while the housing market is projecting mixed signals.

• Australian Dollar was the most resilient currency in face of a Dollar onslaught but could go back below 0.76 after this morning’s Trade Balance report showed an increase in Deficit with exports declining. Like the U.K., Australia is depending on export demand to spur growth in an environment of sluggish domestic spending and the continuation of a decline in exports could lead to a very poor GDP outcome for Q4. But for now, the current theme of interest rates driving currencies continues to lend decent support for the Aussie with the RBA all set to remain on hold in tomorrow’s decision.

FOREX Related Upcoming Economic Release

FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.1900 and high was 1.2031.
The pair closed at 1.1918.

The pair’s losses have accelerated after strong support around 1.20 was broken decisively and it has gone towards 1.1900 with decent bottom picking bid interest just below it and immediate support coming up around 1.1890. A clear break below brings into focus the very strong support in the crucial 1.1850-65 region which has decent bids around it but 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 1.1975 with selling orders lined up above it lined up to the very strong resistance region of 1.2025-50.

Key resistance is seen at 1.1975 followed by 1.2025 while support starts at 1.1910 followed by 1.1850.

USD/JPY – Yesterday’s low was 113.44 and high was 114.36.

The pair closed at 114.23.

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 with key pivot levels lying at 114.40 and 115.05, traditional resistance is seen at a distant 116 if the pivot levels are broken decisively. 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 very strong support 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 – Yesterday’s low was 1.7511 and high was 1.7632.
The pair closed at 1.7550.

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. Since losses have been quick it 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 and make it very hard for it to pare back its losses.

Key Resistance is seen at 1.7595 followed by 1.7655 while support starts at 1.7490 followed by 1.7440.

AUD/USD – Yesterday’s low was 0.7589 and high was 0.7635.
The pair closed at 0.7626.

The Australian Dollaris locked between conflicting fundamental factors but mild bids continue to linger just below 0.76 with immediate support around 0.7575 with a break below likely to accelerate losses towards the 0.7520-35 region which holds very strong support and expected to cap any losses in the near term.On the upside, immediate resistance lies around 0.7645 with selling orders lying above this mark lined all the way up to 0.77 where resistance is very strong. Data outcomes are eyed from both sides.

Key Resistance is seen at 0.7645 followed by 0.7705 while support starts at 0.7575 followed by 0.7520.

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