Australian FOREX Daily Oulook 07/09/2005

07/09/05 (03:00 GMT)

• Dollar pared back part of its losses and sentiment has become a bit less negative on tri- factor of oil prices easing back, upside surprise in the data as well as general assertion that the recent shorting of the Greenback based on fear that U.S. interest rates won’t rise as much and the potential damage caused by the hurricane to broader section of the economy might have been a bit exaggerated. Nonetheless it is a case of wait and watch as to the actual repercussions of this event with short term direction depending on the Fed’s September 20^th rate setting meeting. Earlier, the Services ISM beat expectations going to its highest reading since more than a year.More signs of the U.S. quickly getting back on its feet would shift the focus back on fundamentals with the Dollar still holding the key cards.
  

• Euro has eased back with natural profit taking on its extensive rally in a short time period as mixed outlook for the global economy is preventing the market from putting its weight behind one particular side. In spite of robust data from the zone yesterday, the Euro’s gains were limited due the general rebound by the Dollar as well as due to the fact that the factors which have led to this recovery have vanished again, as the Euro has strengthened back as well as oil prices sky rocketing. Also the export dependant economy of the Euro-Zone will be hurt by any potential decline in the spending habits of the American consumer. The primary reason in the impressive rise of German factory orders is foreign demand which is likely to decrease now. Today’s Industrial Production is also likely to increase but it is the outlook that is concerning the market.

• Yen is back in the mixed interest region of 109-111 range which is leading to slow moves on conflicting factors. Weighing against the Yen was the fourth consecutive monthly decline in household spending but this was offset by the rise in consumer confidence index with the optimism for jobs and the general outlook of the economy improving. Today’s leading economic index is expected to slip back in contraction territory with the inability of consumer spending to pick up the main reason for the expected decline. Global demand is likely to slow which would put greater demand on the domestic economy to keep Japan on its recovery path but recent signals augur well for domestic demand to pick up.

• Pound has slipped back below 1.84 as its recent 600 point rally last week was excessive enough, in spite of generally poor local fundamentals, to warrant further gains. Industrial production declined more than expected with consumer spending already on a weak footing, rising oil and energy prices are adding to the problems. But at the same the factors which would make the BoE stay on hold in tomorrow’s meeting are inflationary concerns but all said and done the fact that the next decisive move in U.K. interest rates would be a reduction is inevitable, be it a delayed one.

• Australian Dollar is back in the region that holds heavy mixed interest thus leading to slow narrow range movements in spite of data lending good support. This morning’s GDP from Q2 beat estimates but it is not a start of a new trend of sustained high growth but rather due to the improvement in the export cycle which is threatened now by higher oil prices. Domestic spending is definitely slowing as is the housing market. Employment data will be keenly eyed tomorrow to gauge the inherent strength in the labour market which has been projecting mixed signals off late.

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FOREX (Foreign Exchange)Key Price Levels

EUR/USD – Yesterday’s low was 1.2443 and high was 1.2515.
The pair closed at 1.2458.

The pair has eased back as recent gains were too quick and a pullback is natural, upside is more difficult to achieve and further losses are likely. Mixed interest lies down till 1.2375 where support is mild with decent bid interest on breaks just below 1.24. A decisive break below the support is likely to accelerate its losses with very strong support coming up around 1.2315 with strong bid interest just below 1.23. Only a break below this mark would shift the pair in neutral territory with mild Dollar bias. On the upside immediate resistance is seen in the 1.2530-45 region followed by very strong resistance in the 1.2590-1.2605 region with strong selling interest above 1.26.

Key resistance is seen at 1.2540 followed by 1.2590 while support starts at 1.2375 followed by 1.2315.

USD/JPY – Yesterday’s low was 109.12 and high was 109.83.
The pair closed at 109.44.

The Yen couldn’t quite break through the strong pivot support region of 108.80-109.00 and has eased back into the technically mixed interest region of 109-111 thus could lead to stiffened movements. Only a decisive break below 108.50 raises hopes of a fresh Yen rally otherwise range trade should continue. Immediate resistance continues at 110.15 with mixed interest and no clear bias seen up till 111. Resistance is strong in the 110.90-111.05 zone with strong selling interest for the pair on any break above 111. Only a break above this mark would shift the pair in neutral territory otherwise the Yen remains poised for further gains.

Key Resistance is seen at 110.15 followed by 111.05 while support starts at 108.90 followed by 108.50.

GBP/USD – Yesterday’s low was 1.8373 and high was 1.8467.
The pair closed at 1.8403.

The pair’s massive rally has exhausted and while for now it is remaining reasonably supported but it is prone to a sharp pull back with immediate support lies around 1.8355 with a break below likely to accelerate losses towards the very strong support mark of 1.8270 with decent bids around. Below this mark mixed interest lies with next distant support around 1.81 with the pair to go back in neutral territory if so happens. On the upside, immediate resistance has moved down to around 1.8435 with very strong offers lying above 1.85 followed by very strong resistance around 1.8520. Any general turnaround by the Dollar would see the Pound slipping the most among all currencies.

Key Resistance is seen at 1.8435 followed by 1.8515 while support starts at 1.8355 followed by 1.8240.

AUD/USD – Yesterday’s low was 0.7647 and high was 0.7693.
The pair closed at 0.7689.

The Australian Dollaris at a pivotal stage hovering around 0.77 with decent sized offers lying just above it and these offers increase in size above 0.7750 lined all the way up to 0.78. Mild resistance lies around 0.7720 with a clear break above bringing strong resistance around the 0.7775 mark with gains beyond it to face strong opposition and only a break above 0.78 raising hopes to reclaim the coveted 80 cent mark. Aussie’s 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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