Australian FOREX Daily Oulook 04/11/2005

MARKET SUMMARY – 04/11/05(03.00GMT)

• The Dollar rose against the majors overnight following Alan Greenspan’s testimony, which confirmed the strength of the US economy. Greenspan said that US economic fundamentals remain firm the economy maintains important forwards momentum the hurricanes will only have a temporary impact. However, he did add: “More uncertainty surrounds the outlook for inflation”. The dollar was also assisted by US ISM non-manufacturing index data, which came in at 60.0 versus expectations of 57.0. The key event is the States later today is the release of the October non-farm payrolls. Also released overnight, was the US Labor Department data showing a 4.1% jump in the third quarter business productivity, far outpacing Wall Street expectations for a 2.5% rise. However, the report had less impact on the dollar.
  

• The Euro fell from 1.2060 to close near its lows of 1.1940 in the New York session. All majors lost ground against the dollar, however the euro was singled out after an anticipated hawkish speech by European Central Bank (ECB) president Jean-Claude Trichet did not materialize, dampening sentiment for an interest rate rise as early as December in the Eurozone. Trichet said that although the ECB was prepared to move rates at any time, he thought that current interest rates were appropriate. His comments would suggest that markets are not going to get a near-term rate move that a lot of people were expecting early this week.
  

• The Japanese yen traded down, opening at JPY116.80 per US dollar before ending near JPY117.20 per US dollar at the New York close. The Japanese yen remains under attack from carry trade speculators who are eager to sell yen against the greenback in order to earn the 4.00% (400 basis points) interest rate differential in the pair.
  

• The Pound was initially higher after it found support from the better-than-expected UK PMI in the service sector which came in 56.1 in October compared with the market expectation of 55.3. However, the strength of the GBP was not sustained for long as it turned the other way around and headed south during the late afternoon trading. The Pound finished lower at US$1.7713/16 from its intraday high of US$1.7794.
  

• The Aussie dollar fell from 0.7415 to close at 0.7390 in the New York Session. The Aussie has been losing ground against the US dollar and yesterday worse than expected data added to its woes.

TECHNICAL COMMENTARY

• Euro – 1.1945

The Euro is now trading at the bottom end of the recent 1.1900 to 1.2200 consolidation range. The major support remains at 1.1871 the July low. There is room to move on the topside with the first resistance located at 1.2040 with major resistance located at 1.2204 (Oct 6 high).

• Yen – 117.40

USD/JPY continues to make advances with a possible extension towards 117.74 (Sept 8 2003 high). Above this level opens the way for a test of 118.43 resistance (50% retracement of the 135.18 to 101.67 decline).Short-term support is located at 116.00 with 114.60 taking on more significance.

• Pound – 1.7690

The recovery from 1.7620 gives some promise to bulls however the pound needs to regain the 1.7817 level to indicate a possible test of major resistance at 1.7904. In lieu of 1.7825+ price action, the Pound remains vulnerable near-term, with the focus on 1.7595 – a loss of which would expose 1.7423, the low from Oct 18.

• Aussie – 0.7385

Aussie has now breached and closed below 0.7438 (Oct 19 low) and now exposes 0.7365 (July 7 base and low for 2005). Resistance is now initially found at 0.7440 followed by 0.7520.