Australian FOREX Daily Oulook 15/07/2005

15/07/05 (06:00 GMT)

• Dollar strengthened mildly as data for the second consecutive day surprised, but this time to the downside. Consumer Inflation was below expectations in spite of rising oil prices. While retails sales did increase more than expectations but Autos made up bulk of the sales, nonetheless sentiment remains in the Greenbacks favour with today’s heavy US data calendar eyed. Industrial production is the main focus and is expected to be dollar positive. The tame inflation figures do throw a few question marks on the Feds rate hike stance, but producers have been slow in passing on their costs, thus next month’s CPI figure should increase.

• Euro has benefited this entire week from the subsiding of fears of a rate cut in the short term and it got another mild boost from the commence of ECB member Issing when the ECB’s monthly bulletin was released. He stated that inflation was expected to stay above the banks 2% target mark, adding that the inflation outlook has clearly worsened. With oil prices spiking and a weaker Euro boosting exports the chances of ECB going for a rate cut have reduced significantly and they are likely to stay on hold for the rest of the year. Earlier GDP outcome was revised higher but overall economic conditions remain weak. For now a decisive loss of 1.20 pivot region could accelerate its losses.

• Yen remained within its recent range but sentiment has turned a bit more negative, as data outcomes are shifting from being average to weak. It has failed to benefit from the easing in oil prices due to the poor data with bankruptcies increasing more than expected which was its highest level of increase since 2002. The weakness has not just been confined to corporates but to small business as well. This coupled with poor export orders as well as domestic demand should force the government to revise their optimistic growth outlook for the second half of the year. Today’s department store sales are eyed to see if consumers have come out of their sluggish state of spending.

• Pound slipped further as the focus has shifted back to fundamentals which as in recent times continues to show the Pound in poor light. The BCC economic survey reflected concrete signs of a slowing economy with broad based decline in the manufacturing and services sector. Sales in the domestic sector went to a six year low while the sharp plunge in consumer spending has decreased the growth rate which has lead to the Euro Zones rate being higher than the UK, for the first time in four years. For now resistance continues within the 1.77 region with US data eyed for direction.

• Australian Dollar’s direction was a bit mixed and it was confined to narrow range bound movements as it waits for some decisive break outs on other majors to take cue from their direction. It remains vulnerable for further losses as key commodities are expected to ease back, for now decent support lies around 0.7455. The New Zealand dollar hasn’t been as resilient as the Aussie as its economy is more vulnerable to global demand for imported products.

FOREX Related Economic Data Released

EUR/USD – Yesterday’s low was 1.2056 and high was 1.2123.
The pair closed at 1.2095.

Mixed economic data as well as conflicting technical interest led to surprisingly slow movements for this pair. The Euro did well to stay above 1.20 with immediate support seen at the 1.1990-1.2010 support zone. A decisive break below that region could accelerate its losses towards the 1.1910-25 support region. On the upside resistance should continue around 1.2155- 70 zone with decent sized offers lined above 1.22. If it does manage to break decisively into the 1.22 region then 1.23 should pose as very strong resistance. Today’s direction is derived from key US data with industrial production the main focus. If the pair remains above 1.20 then it is likely to remain range bound within its recent ranges.

Key resistance is seen at 1.2175 followed by 1.2240 while support starts at 1.1990 followed by 1.1875

USD/JPY – Yesterday’s low was 111.64 and high was 112.36.
The pair closed at 112.28.

The pair remained within its recent range which was within the technically mixed interest zone of 111.50-112.25. However it is vulnerable for further losses with immediate resistance seen around 112.75 with a decisive break above likely to accelerate it’s losses. Sentiment has turned a bit more negative for the Yen with strong dollar bids seen round 111.50. A break below could bring into focus the strong support zone of 110.90-111.05. Apart from US data, Oil price movements are eyed for intra day direction.

Key Resistance is seen at 112.75 followed by 113.20 while support starts at 111.45 followed by 110.90.

GBP/USD – Yesterday’s low was 1.7547 and high was 1.7645.
The pair closed at 1.7567.

Sentiment for the Pound remains weak and it is vulnerable for further losses, immediate support is seen in the 1.7505-20 support zone. A decisive break below could accelerate its losses and could lead to moves towards the 1.7425 pivot support mark, which has decent buying interest around it. On the upside the 1.76 region has mixed technical interest with strong offers lined above 1.77. A decisive break into the 1.77 region could shift intra day momentum in the Pound’s favour but US data is eyed for further direction.

Key Resistance is seen at 1.7690 followed by 1.7755 while support starts at 1.7505 followed by 1.7425.

AUD/USD – Yesterday’s low was 0.7485 and high was 0.7538.
The pair closed at 0.7514.

The Australian Dollar remained well within its narrow range as decent bids around 0.7475 held firm for now. A decisive break below this support mark could accelerate losses towards the 0.7425-40 pivot support region. On the upside resistance continues around 0.7555 with a break above likely to lead to moves towards the strong resistance zone at 0.7590-0.7610, with very strong offers lined up above this zone. It remains vulnerable for further losses as key commodities are expected to be subjected to another bout of profit taking.

Key Resistance is seen at 0.7555 followed by 0.7605 while support starts at 0.7475. followed by 0.7425.

Kunal Sharma
Forex Analyst

Easy Forex Pty Ltd. (Australia)
E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products