Australian FOREX Daily Oulook 12/10/2005

12/10/05 (03:00 GMT)

• Dollar rallied across the board riding on the momentum emanating from rising interest rates while weak data from other regions also helped in increasing the positive sentiment around the Greenback. The Fed’s meeting minutes were on expected lines with the Fed explaining their stance of raising rates immediately after the hurricane because they did not want to mislead the market. The Fed’s chain of thought is that the economy is on a reasonably strong footing and their main aim is maintaining price stability among rising inflationary pressures, thus they will keep raising rates. Dollar also finally made some substantial gains against the commodity bloc as the minutes revealed that the Dollar is likely to close the yield gap sooner than expected. Thus it remains to be seen how well an average American consumer copes with high debt, rising interest rates as well as high oil prices which remain supported above $60 pb.
  

• Euro has slipped below 1.20 and risks further losses as long as the focus remains squarely on Dollar’s yield advantage over it. Also weighing in against it is the uncertainty surrounding the formation of the new German government and while Merkel will be the Chancellor, Schroeder’s party is likely to get the key positions in the cabinet as a trade off. Data however remained firm, with French Trade Deficit declining on the back of rising exports as European product prices aren’t rising as much due to low inflation compared to other regions. Meanwhile debate continues within the ECB in regards to going ahead with a rate hike in the face of slow growth.
  

• Yen has declined taking cue from Dollar’s broad rally and having already gone towards its lowest level in the last two years, it now risks slipping into the 115 region. Nonetheless, Japanese fundamentals seem to be on a strong footing with Machinery Orders rising much higher than expected. This result is all the more impressive in the current environment where exports haven’t increased but domestic demand is rising steadily led corporate capital spending. Also the Economy’ Watchers index remained above the critical boom or bust line while the expectations sub index also rose. Today’s Consumer Confidence index is expected to rise on improved conditions but high oil prices are causing a concern.

• Pound has crashed towards 1.7420 and risks further losses as data continues to be surprise to the downside. Trade deficit widened to a record level as the U.K. became a net Oil importer than exporter for the first time in a year while imports continued to grow at a faster rate than exports. For now further free fall in the Pound could be stiffened by BoE Gov King’s comments which implied that he more concerned about rising inflationary pressures rather than signs of slow growth and remains opposed to any rate cut in the near future.

• Australian Dollar has eased back and this time rising metal prices weren’t enough to keep it supported as Consumer Confidence has gone to a two and a half year low due to concerns on rising oil prices as well as the sharp fall in the stock market. RBA’s deputy Gov Stevens did state that rates were expected to stay on hold well into the next year but he wasn’t as hawkish as the market was expecting. A poor result in tomorrow’s Employment data risks further losses for the Aussie which could break key support levels.

FOREX (Foreign Exchange)Key Intra-Day Pivot levels

EUR/USD –Yesterday’s low was 1.1964 and high was 1.2056.
The pair closed at 1.1967.

The pair continuing from its losses the day before has mild bottom picking bid interest just bellow 1.1950 with support lying in the 1.1890-1.1910 region. A clear break below this region brings very strong support around the 1.1850 mark with equally strong bid interest. However any moves lower will send it towards its lowest levels in the last two years will shift it into deep negative region. On the upside immediate resistance has now moved down to 1.2060 and any moves above 1.21 to lead to strong selling orders with very strong resistance around 1.2140.

Key resistance is seen at 1.2060 followed by 1.2140 while support starts at 1.1910 followed by 1.1850.

USD/JPY – Yesterday’s low was 113.81 and high was 114.64.

The pair closed at 114.56.

Yen has slipped further on Dollar’s strength and now risks slipping into the 115 region but before that mild resistance lies around 114.75, a strong break above will make gains tougher as we move into the 115 region with very strong resistance lying at 115.40 with selling orders around it. On the downside, immediate support has now moved up to around 113.90 which is followed by strong support around the 113.45 mark and decent bid interest just below it. Only moves back into the 112 region will bring the pair back in neutral territory otherwise the Yen risks further losses.

Key Resistance is seen at 114.75 followed by 115.40 while support starts at 113.90 followed by 113.40.

GBP/USD – Yesterday’s low was 1.7424 and high was 1.7558.
The pair closed at 1.7431.

The pair continues to slip on weak fundamentals but we approaching key support levels which are expected to remain firm and provide strong support before caving in. Immediate strong support lies in the 1.7370-85 region which has previously been the base of a few massive uptrends but a clear break below risks acceleration of losses before very strong support crops up at 1.7290-1.7310 region. Strong bid interest lies around and a break below will send it to its lowest levels in more than two years and shift it in deep negative region. On the upside, broad range trading is possible with immediate resistance at 1.7550 followed by selling orders lined above the 1.76 mark with very strong resistance around 1.7615. The Pound is likely to remain under pressure on its crosses.

Key Resistance is seen at 1.7550 followed by 1.7610 while support starts at 1.7370 followed by 1.7310.

AUD/USD – Yesterday’s low was 0.7506 and high was 0.7581.
The pair closed at 0.7511.

The Australian Dollarhas eased back further breaking strong support around 0.7550 but immediate support comes up in the 0.7490-0.7505 region with decent bid interest around it. A break below risks acceleration of losses before finding decent support around 0.7430 which should hold in the near term. On the upside, immediate resistance has moved down to 0.7575 with selling orders lying above 0.76 with strong resistance around 0.7620.

Key Resistance is seen at 0.7575 followed by 0.7620 while support starts at 0.7490 followed by 0.7435.

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