Australian FOREX Daily Oulook 05/09/2005

05/09/05 (02:00 GMT)

• Dollar remains under pressure with sentiment turning further against it as effects of the Hurricane and its repercussions to the economy in general are grasped. Employment data was mixed as payrolls came in less than expected but was offset by upward revisions to previous month’s data, slight increase in average hourly earnings and unemployment rate inching down to 4.9% a four year low. Current labour market conditions are no doubt robust but outlook for next month given the massive job losses due to the hurricane could lead to a very poor number. Since a fair degree of Fed’s future rate hikes have been priced in by the market, these renewed growth doubts could lead to the Fed pausing which is weighing heavily against the Greenback at the moment, as it continues to slide in the Asian session.

• Euro has managed to close above 1.25 remaining buoyed by dollar’s woes but lack of any major data from the U.S will put the focus on the Euro-Zone’s heavy data set which is expected to be on the weak side. Since most results will reflect activity in August when the Euro had started appreciating and oil prices sky rocketing, consumer spending and demand for exports has started declining again. Earlier on Friday, PPI from the zone remained high like in other parts of the world with soaring oil and energy prices to blame but producers would be reluctant to pass on all these high costs to the beleaguered consumers.
  

• Yen on Friday again failed to break below the crucial 109 mark and hasn’t decisively done that since the last two months however it is close to doing so now and is looking reasonably bid after this morning’s Newspaper poll which suggests Prime Minister Koizumi will get reelected with an increased majority. This would enable the reform friendly leader to push through the postal bill as well as other liberalized plans through the parliament. Also supporting the Yen is the increasing interest in Japanese assets by foreign investors with the Nikkei advancing for the fourth straight week. Low household spending is currently a sore point and general improvement in conditions is being offset by record high oil prices.

• Pound thanks to its high yield continues to benefit from question marks in regards to the U.S. Fed’s rate hike stance. Before the hurricane and recent steady data from the U.K. the Pound’s yield advantage was set to reduce to 25 bps by the year end but now it could as much as 75 bps and this new chain of thought is leading to the liquidation of positions previously built on the assertion that the yield gap would reduce quickly. Earlier on Friday upside surprise in the data lend solid support with construction PMI result suggesting strong activity in the commercial sector. While the market now expects no rate cuts till the end of the year, consumer spending is still failing to pick up and until then a rate cut can’t be ruled out.

• Australian Dollar remains supported with a key driving factor now hinging on the U.S. Fed’s action on interest rates with Australian rates expected to stay put on 5.5% till at least the early part of next year, any pause from the Fed would lead to a rush for Aussie and Kiwi dollar positions. For now commodity prices are inching higher and reasonably supported while demand from Asia remains steady for Aussie exports. Domestic conditions are a bit mixed with local employment data eyed to gauge the labour market.

FOREX (Foreign Exchange)Key Price Levels

EUR/USD – Yesterday’s low was 1.2466 and high was 1.2589.
The pair closed at 1.2528.

The pair gained further but pre weekend position squaring stiffened its gains but it is staying well supported for further gains by closing above 1.25. Immediate resistance continues in the 1.2610-25 region with decent offers lying on any break above 1.26. A clear break above brings into focus very strong resistance around 1.2675-90, this region is crucial and a decisive break higher raises hopes of a fresh uptrend to 1.30. On the downside, bid interest is coming up on dips towards 1.25 with a break to accelerate losses which should bring the strong support mark of 1.2380-95 into focus but a break below 1.23 is needed to shift the pair back in neutral territory.

Key resistance is seen at 1.2620 followed by 1.2680 while support starts at 1.2505 followed by 1.2395.

The Yen is under pressure on its crosses which is leading to its gains being stiffened on the main pair compared to other majors but dollar’s woes are helping it rally. The pair is in neutral territory and the Yen will only be able to take the initiative if it can break decisively below 108.90-109.10 pivot region. Otherwise it is likely to go back into its 109-111 trading range as mixed interest lies within this region with immediate resistance around the 110.15 mark followed by very strong resistance in the110.90-111.05 zone. It is close to breaking below the key support region

Key Resistance is seen at 110.85 followed by 111.55 while support starts at 109.10 followed by 108.70.

GBP/USD – Yesterday’s low was 1.8302 and high was 1.8447.
The pair closed at 1.8412.

The pair remains buoyed by breaking resistance barriers but remains prone to volatile moves with immediate resistance seen around 1.8515 followed by decent offers lying on any break above 1.85.However a decisive break above 1.86 raises hopes of a fresh uptrend towards 1.90 before which strong resistance lies in the 1.8585 mark. On the downside immediate support now come up at 1.8355 with decent bottom picking bid interest just below 1.83. A clear break brings support around the 1.8240 pivot mark with pair to go back in neutral territory on a break below.
Key Resistance is seen at 1.8515 followed by 1.8585 while support starts at 1.8355 followed by 1.8240.

AUD/USD – Yesterday’s low was 0.7613 and high was 0.7664.
The pair closed at 0.7649.

The Australian Dollaris back above 0.76 which has held decent offers in recent times with immediate resistance seen around 0.7705-20 with offers increasing in strength above it. A break above brings very strong resistance around 0.7775 with gains beyond it to face strong opposition and only a break above 0.78 raising hopes to reclaim the coveted 80 cent mark. Its high yield factor has now bumped up immediate support to the 0.7610 pivot mark with strong bottom picking bid interest to continue around 0.7555.

Key Resistance is seen at 0.7720 followed by 0.7775 while support starts at 0.7610 followed by 0.7555.

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