Australian FOREX Daily Oulook 10/10/2005

10/10/05 (02:00 GMT)

• Dollar pared back some of its losses after a much better than expected Payrolls outcome while the upward revision of the previous two months result also gave it a boost. While this result does signify that the Hurricanes had a small impact on the employment sector, question marks have been raised on the accuracy of this report. Some job losses are likely to be reflected in next month’s report but at the same time the rebuilding effort should boost employment numbers. Security Alert in New York for the second day running also led to uncertain price action as the focus shifts to this week’s data with the release of the Fed’s meeting minutes as well as the Deficit which is likely to have increased on high import costs.
  

• Euro drifted along with Dollar’s general direction still remaining buoyant from Trichet’s surprising hawkish comments the day before.Recent conflicting data outcomes are preventing a clear trend and the Euro’s moves towards 1.22 were met with decent selling orders. Earlier, German Industrial Production came in much weaker than expected as the rise in oil &amp energy prices coupled with other spikes in raw material prices offset the benefits of the recent rise in exports. ECB has a history of preparing the market well in advance of its next move and while the comments do suggest they are seriously considering increasing rates, it could backfire in the current environment of sluggish economic conditions.

• Yen remained within the 113 region and slightly under pressure on its crosses but it could well reverse its losses in the near future as most indicators point towards an improved Q4 and much better economic performance next year. Monthly household spending increased while the decline in the annualized result was less than expected, it is taking a bit of time but consumer confidence and spending are rising steadily given the improvement in wages. Meanwhile, the Leading Economic index went back strongly into the expansion region while the Coincident indicators rebounded as well. Like the ECB, the Bank of Japan is also preparing the market for a rate hike which could be early next year.

• Pound for now is hostage to Dollar’s general direction as it is helped higher on any general sell off in the Dollar but its own weak fundamentals mean that it is prone to fall the most on any Dollar rebound. In the current environment where U.S., Euro-Zone and Japan are looking to raise rates while other high yielders likely to stay on hold, the U.K. is going to be the only nation among the majors to be cutting rates in the near future, this is weighing against it and it is expected to weaken further on its crosses. Today’s Producer inflation data is set to show a rise but would be detrimental to the growth prospects while House prices should continue their decline.

• Australian Dollar is caught between conflicting factors which could lead to further narrow range trading as the rise in deficit, slowdown in the housing market and other major regions increasing interest rates reduce its own high yield advantage are making up the negatives while key commodities’ prices refuse to ease back with Gold looking bullish on inflation concerns and demand also remaining steady make up the positives. Key local data is eyed this week to gauge the strength in domestic demand.

FOREX Related Upcoming Economic Release

FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Friday’s low was 1.2094 and high was 1.2179.
The pair closed at 1.2128.

The pair has closed in mixed interest region of 1.21 with immediate resistance lying at 1.2210 and decent selling orders lying above it. A stronger break above it brings into focus very strong resistance region at 1.2285-1.2305, this area is expected to hold well but the Dollar risks a fresh downtrend if this region is decisively broken above. On the downside, immediate support crops up around 1.2045, a loss of this mark could accelerate losses below 1.20 before decent bottom picking bid interest comes up with good support around 1.1975. A clear and decisive break below this mark will shift the momentum back in the Dollar’s favour.

Key resistance is seen at 1.2210 followed by 1.2305 while support starts at 1.2045 followed by 1.1975.

USD/JPY – Friday’s low was 113.26 and high was 114.01.

The pair closed at 113.77.

Yen is caught between mixed technical interest as well as conflicting fundamental factors, thus leading to directionless moves within the 113 region with immediate resistance at 114.15 with decent selling orders lying just above it. The resistance is stronger around 114.55 and any breaks above would make it very hard for the Yen to pare back its losses. On the downside immediate support lies around 113.10 with decent bid interest around it. A clear break below brings very strong support at 112.70 with only a break below to shift the momentum in the Yen’s favour.

Key Resistance is seen at 114.15 followed by 114.55 while support starts at 113.10 followed by 112.70.

GBP/USD – Friday’s low was 1.7676 and high was 1.7773.
The pair closed at 1.7602.

The pair is caught between weak U.K. fundamentals and Dollar’s profit taking sell off, and for now the Pound has bottom picking bid interest just below 1.76 with immediate support seen at 1.7570. A break below brings strong support in the 1.7505-20 region which is expected to be firm and any moves below risks a fresh downtrend. On the upside, broad range trading is possible with immediate resistance at 1.7690 followed by selling orders lined within the 1.77 region and strong resistance at 1.7755. The Pound is likely to remain under pressure on its crosses.

Key Resistance is seen at 1.7690 followed by 1.7755 while support starts at 1.7570 followed by 1.7505.

AUD/USD – Friday’s low was 0.7556 and high was 0.7613.
The pair closed at 0.7567.

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 0.7675 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 0.7675 while support starts at 0.7540 followed by 0.7490.

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