Australian FOREX Daily Oulook 16/11/2005

MARKET SUMMARY – 16/11/05(03.00GMT)

• The Dollar was unable to hold onto gains made in the London, and ended weaker in the New York session despite a friendly mix of data. US October retail trade fell 0.1% while the market had expected a 0.7% fall. The US producer price index (PPI) rose 0.7% in October compared to the consensus expectation of a flat result. The US Empire manufacturing survey was much stronger than expected in November, rising to 22.8 from 12.1 in October and compared to the expectation of 15.5. Ben Bernanke’s testimony hearing before the Senate Banking Committee contained no surprises. He supported Greenspan’s risk-management approach to monetary policy. In the US today, the inflation story continues to unfold with the release of the October CPI. The market expects the CPI to be steady in October and to rise by 0.2%
  
• The Euro finished slightly higher at 1.1710 after falling to 1.1640 in early New York trade. Eurozone GDP was stronger than expected in the September quarter. It rose by 0.6% compared with market’s expectation of a 0.5% rise. This data adds further support to calls for an ECB rate hike in the coming months. Also in the Eurozone, German ZEW economic sentiment was weaker than expected in November. It fell to 38.7 versus expectations of 44.0.
  
• The Japanese yen finished largely unchanged in the New York session and traded in a 118.71 to 119.35 range. The persistent pressure by senior members of the government over the past few days has damaged the BOJ’S credibility and independence and accordingly has helped driver a weaker Japanese yen.
  

• The Pound slid to a four-month low of 1.7309 against a rallying USD and dipped against the EUR, reflecting the weak CPI figure. The UK CPI rose slightly less than expected in October. It was up 0.1% on a monthly basis, bringing annual inflation to 2.3%. This is above the Bank of England’s 2% inflation target.
  

• The Aussie rose against the dollar from 0.7285 to 0.7330. The wage price index, which measures hourly rates of pay, rose 1 per cent in the September quarter, giving an annual increase of 4.2 per cent, the Bureau of Statistics said on Wednesday. This was in line with the market expectations.

TECHNICAL COMMENTARY

• Euro – 1.1720

The bear trend from 1.2170 (Oct 27 high) maintains its pattern of lower lows and lower highs, setting another new at 1.1644 Tuesday. A breach of the 1.1644 trend low would most likely see a test of the key 1.1588 area. It marks the 38.2% retracement of the massive .8225 (October 2000 low) to 1.3663 (December 2004 high) rally. Only a move above the 1.1773 to 1.1830 congestion zones would put the bear trend on hold.

• Yen – 119.15

USD/JPY has climbed to fresh highs, confirming a continuation of the uptrend. The break above the 118.42 (50% retracement of the major 135.14 – 101.71 decline) opens the door for a move towards 120.00 and 120.68. The previous resistance of 118.43 will now act as support, followed by the 116.88 (Nov 9 low) as a key support level and a break of this level is required to undermine the current uptrend.

• Pound – 1.7380

A break of the 1.7309 trend low would open the door for a move towards the 1.7270 low from July 20. Initial mild resistance is in the 1.7436 (61.8% retracement of the decline since 1.7514 thus far) area, but only a move above 1.7514 (last Thursday’s reaction high) to 1.7535 (38.2% since 1.7901) would put the bear trend on hold in the short term.

• Aussie – 0.7310

Support is located at 0.7242 which marks the 61.8% retracement of the rally from 0.6781 (June 17, 2004 low) to 0.7989 (March 08, 2005 high). Short-term resistance is well defined at last Wednesday’s 0.7379 high, followed by 0.7393, the 38.2% retracement of the declines thus far from the Oct 27 0.7601 high.