Australian FOREX Daily Oulook 09/11/2005

MARKET SUMMARY – 09/11/05(03.00GMT)

• The Dollar weakened against the major currencies overnight, after making multi-month highs earlier in the session. The big news overnight was an 11.3% fall in luxury builder Toll Brothers share price, who warned that new home deliveries and earnings would probably fall short of its forecasts. A range of third tier data was released overnight, generally suggesting strength in the US economy. There are no major data releases scheduled for today either, but of great interest will be the weekly mortgage applications index, particularly given the decline in the housing stocks overnight. The outlook for the housing market is key to the Federal Reserve outlook and will also be very important for the dollar, since a pronounced slowing in housing demand would reduce US demand for foreign capital.
  

• The Euro briefly hit two-year low of 1.1709, before reversing to close the New York session near its highs of 1.1709. There was no major economic data released in Eurozone yesterday, however ECB council member Yves Mersch told Market News that the ECB put their words in to action in regards to tightening monetary policy. In response to these comments, the Euribor curved moved higher but the move was tempered by later more neutral remarks from fellow council member Garganas.
  

• The Japanese yen lifted from lows of JPY117.93 per US dollar to JPY117.08. Japan’s October foreign exchange reserves fell for the 7^th month out of the last 10 to USD841billion. Lower reserves generally indicate less demand for yen.
  

• The Pound rebounded from a low of 1.7350 to finish the New York session around the 1.7420 level. The Monetary Policy committee starts their meeting today, with money markets staking their bets on no change from the present 4.5% rate in the announcement tomorrow.
  

• The Aussie dollar recovered from a 12-month low of 0.7292 to close the New York session near its highs of 0.7358. In Australia today, housing finance approvals rose a stronger-than-expected 4.6% in September, signaling a healthy rebound that is unlikely to concern the Reserve Bank of Australia given the housing market is still reasonably soft, say economists.

TECHNICAL COMMENTARY

• Euro – 1.1760

An oversold RSI indicator has finally sparked a mild recovery in the Euro from 1.1712 Heavy resistance from 1.1830 (top of Monday’s congestion) to 1.1871 (July 5 low) will likely attract selling pressure. The next important support is at 1.1588 level. This level marks the 38.2% retracement of the major 0.8232 to 1.3663 rally. Below there is the 1.1383 low from Nov 2003.

• Yen – 117.80

A break and close below last Friday’s 117.14 low and preferably beneath the formerly resistant 116.24 level is required to define an interim high at 118.39. On the topside renewed gains beyond 118.43 is seen as the catalyst for an extension towards the psychological 120 level (and area of Aug 19, 2003 peak at 119.83).

• Pound – 1.7425

It is very important for support levels between Oct 12’s 1.7391 low and the year’s 1.7271to hold if sterling is to make a recovery. First level on the topside is 1.7519, followed by 1.7595, with major resistance at 1.7825.

• Aussie – 0.7335

The recovery from Tuesday’s new trend low at 0.7286 through Monday’s 0.7342 high creates a possible key reversal day on the daily chart. This could see a recovery toward 0.7406 (38.2% retracement of the .7601 to .7286 decline). Only a move above 0.7434 (small reaction high from Nov 2), would put the overall bear trend on hold. Only a break of 0.7286 would open the door toward .7238 (61.8% retracement of the 0.7590 to 0.6773 Feb-June ’02 decline).