Australian FOREX Daily Oulook 11/10/2005

11/10/05 (02:00 GMT)

• Dollar strengthened further in holiday thin markets with positives emanating from the better than expected Payrolls outcome reaffirming the Fed’s stance for two more rate hikes by the end of this year. Also those positions which were built against the Dollar towards the end of last week due to security alerts in New York were liquidated as an incident free weekend passed by. However Dollar remained unchanged against the commodity bloc as high inflation and global uncertainty have led to Gold prices soar towards 18 year highs. Today’s release of the Fed’s meeting minutes is expected to be on familiar lines of their deep concern on inflation and need to keep raising rates.
  

• Euro experienced an initial boost after a compromise between the two largest parties in Germany who will form a grand coalition and Schroeder will step down in favour of Angela Merkel, However it pared all its gains and Dollar’s general momentum saw the Euro slip further. Merkel will be the first female Chancellor and running a coalition of the two biggest parties last seen in 1969, and it is going to be a difficult task given that economy sorely needs good reforms to get out of its sluggish state. Earlier, data showed once again how a weaker Euro is helping in boosting exports with French Industrial production coming in higher than expected while German Trade and Current account surplus remained around healthy levels offsetting the high import costs of oil.
  

• Yen slipped on Dollar’s general strength going back into the 114 region with Japanese markets closed for holiday leading to thin trading conditions. The market is now expecting a definite move from Bank of Japan in raising rates early next year, and any indication that proves otherwise would weigh in against the Yen as the U.S. is all set to raise rates probably 3 more times before a Japanese rate hike comes by. The Yen is likely to get a boost from today’s machinery orders data which should increase on general improvement in economic conditions.

• Pound is prone to exaggerated moves and sharp falls on any Dollar rebound as its own fundamentals are on a weak footing. House prices declined but signs of stabilization are also seen while PPI output prices rose more than expected confirming the Bank of England‘s concern on rising inflationary pressures. BRC Retail sales survey has pointed towards an improving trend but further concrete evidence is needed to see if consumer spending can rebound. For now, inflationary pressures are preventing a rate cut but any signal that BoE are ready to cut rates would hit the Pound hard.
  

• Australian Dollar remained locked in a very narrow range as any positives emanating from its high correlation with Gold prices, which went towards 18 year highs, was negated by the general rally by the Dollar and the decline in Australian home loans. With its yield advantage expected to decline steadily, local data and export demand is eyed to keep it supported. The focus will be on Thursday’s employment data which is expected to remain around healthy levels.

FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD –Yesterday’s low was 1.2040 and high was 1.2153.
The pair closed at 1.2052.

The pair’s losses have accelerated after 1.21 level was decisively broken below with immediate support seen around 1.1975 but it has decent bottom picking bid interest just below 1.20. A clear break below the support mark could quicken its losses towards very strong support region of 1.1890-1.1910 which is expected to hold well. On the upside immediate resistance has moved down to 1.2120 with mixed interest seen above it up to the 1.22 mark where resistance is strong and decent selling orders lie above it.

Key resistance is seen at 1.2120 followed by 1.2205 while support starts at 1.1975 followed by 1.1910.

USD/JPY – Yesterday’s low was 113.54 and high was 114.28.

The pair closed at 114.07.

Yen is caught between mixed technical interest as well as conflicting fundamental factors, thus leading to directionless moves with the range trading between the 113.50-114.50 area the likely scenario. Immediate resistance is seen at 114.50 with a clear break above could send it towards the crucial 115 mark which holds very strong resistance and has selling orders lying above it. On the downside, immediate support lies around 113.40 which is followed by strong support around the 112.90 mark and decent bid interest just below 113.

Key Resistance is seen at 114.55 followed by 115.05 while support starts at 113.40 followed by 112.90.

GBP/USD – Yesterday’s low was 1.7514 and high was 1.7633.
The pair closed at 1.7544.

The pair has declined further and for now the Pound has bottom picking bid interest just below 1.75 with immediate support seen at 1.7490. A break below brings strong support in the 1.7420-35 region which is expected to be firm and any moves below risks a fresh downtrend towards yearly low levels. On the upside, broad range trading is possible with immediate resistance at 1.7610 followed by selling orders lined above the 1.7655 mark with very strong resistance around 1.77. The Pound is likely to remain under pressure on its crosses.

Key Resistance is seen at 1.7610 followed by 1.7705 while support starts at 1.7490 followed by 1.7420.

AUD/USD – Yesterday’s low was 0.7566 and high was 0.7605.
The pair closed at 0.7579.

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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