Australian FOREX Daily Oulook 06/10/2005

• Dollar has slipped back against European currencies largely on position squaring with the much weaker than expected result in ISM Services index acting as a catalyst for its slide. The market has been to looking to book profits since the Dollar failed to sustain its rally early this week and the services index going towards its lowest level in more than 2 years provided the perfect excuse to do just that. However it managed to gain against the Commodity bloc as oil prices eased back further while Gold was subjected to profit taking. The focus shifts to tomorrow’s Payrolls data with uncertainty around this usually volatile data has further increased this around due to the jobs lost to the hurricane as well as conflicting results in sub employment reports in the last few weeks.

• Euro has rebounded back above 1.20 due to general profit taking and weak data plaguing the Greenback as well as upside surprise in the data from the Euro-Zone. PMI Services rose in the zone with gains seen in Germany Spain &amp Italy which went back into expansion territory.Retail Sales also rebounded strongly which apart from seasonal factors can also be attributed to the cyclical benefits emanating from a weaker Euro. The entire cycle over the past year of the Euro bouncing from below 1.20 to above 1.35 and back down has clearly shown that the Euro-Zone only expands when the Euro is below 1.25 and starts contracting when the Euro goes towards 1.30. To make significant gains from here on, concrete evidence is needed to see if the recent improvement in the corporate sector trickles down to the average consumer, which has not happened yet.

• Yen has not only been outgunned in the yield battle but has also come in second best comparing the recent data outcomes and as a result its gains against the Dollar have been stiffened while it has slipped back against the Euro. Latest reports suggest that Bank of Japan is expected to revise its inflation forecasts upwards as well as growth forecasts. This should translate to them looking to end their ultra loose monetary policy. However by then for an investor chasing high yield the U.S. yield advantage would be much more attractive. It is also under pressure from the losses on the Nikkei which is taking cue for the sell off in the U.S. stock market.

• Pound’s gains were initially stiffened due to its own poor data but eventually the broad Dollar sell off has helped it break above 1.77. Earlier the U.K. Services index came below expectations dipping to its lowest level since December 2004. The focus shifts to Bank of England’s interest rate decision in today’s meeting where they are widely expected to remain on hold in spite of concrete signs of slow growth. Their assertion is based on the increase in inflationary pressures which have gone to multi year highs and are refusing to ease back. Also unlike the Euro-Zone, the U.K. is less dependant on exports and its Services dependant economy is currently reeling from sluggish domestic conditions.

• Australian Dollar has slipped across the board after this week’s widening of Trade Deficit, RBA staying on hold, Building approvals plunging sharply while yesterday the Aussie Stock market witnessed its biggest single day loss in 3 years thus all these factors combined in leading to a profit taking exercise. Also fears that slowdown in global growth will lead to a decline in export demand has also contributed in reducing the sentiment around the Aussie.

FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.1914 and high was 1.2017.
The pair closed at 1.2013.

The pair has surprised to the upside by breaking decisively above 1.20 on general position squaring and the pair has shifted back into neutral territory. Immediate resistance lies in the 1.2060-75 region with mild offers lying above it. The selling orders increase in strength above 1.21 with strong resistance around 1.2150. Mixed interest lies above it and the pair could go back into range trading mode with any gains expected to be capped within 1.2275-1.23. On the downside, immediate support comes up around 1.1940 but its a weak level with strong support coming up in the 1.1890-1.1910 region. A break below will send the Euro back in deep negative territory.

Key resistance is seen at 1.2075 followed by 1.2150 while support starts at 1.1940 followed by 1.1890.

USD/JPY – Yesterday’s low was 113.57 and high was 114.40.

The pair closed at 113.97.

The Yen has finally stabilized and could slip into range trading mode a strong support lies around 113.40 while resistance is equally strong around 114.50. A break above this mark brings the crucial 115 level which will be very hard to break and any gains from there on will be subjected to profit taking and could be stiffened. A break below the support mark could accelerate the Yen’s gains before very strong support comes up around 112.90 with decent bid interest just below 113.

Key Resistance is seen at 114.50 followed by 115.05 while support starts at 113.40 followed by 112.90.

GBP/USD – Yesterday’s low was 1.7579 and high was 1.7695.
The pair closed at 1.7676.

The pair has rebounded on general profit taking on Dollar longs with key level at 1.7715 breached but offers increase in size above 1.7750 which could make further gains hard to achieve. Immediate resistance comes up in 1.7760-75 region. A break above will lead to mixed interest followed by decent selling inertest above .1.78 and strong resistance around 1.7840. On the downside exaggerated moves are likely with support seen at 1.7625 followed by strong bottom picking bid interest and support seen around 1.7580. It could remain under pressure on its crosses with general Dollar trend eyed.

Key Resistance is seen at 1.7760 followed by 1.7840 while support starts at 1.75625 followed by 1.7580.

AUD/USD – Yesterday’s low was 0.7551 and high was 0.7632.
The pair closed at 0.7572.

The Australian Dollarhas eased back but decent bid interest has emerged just below 0.7550 with decent support around 0.7540. It could be stuck in narrow range trade with poor data likely to limit upside with selling orders lying above the immediate resistance mark at 0.7620. A break above will bring into focus strong resistance around 0.7655 with only a break above likely to raise hopes of fresh gains. On the downside a clear break below 0.7540 could accelerate losses towards 0.7490 where bid interest is strong.

Key Resistance is seen at 0.7620 followed by 0.7655 while support starts at 0.7540 followed by 0.7490.

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