Australian FOREX Daily Oulook 17/08/2005

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17/08/05 (05:00 GMT)

• Dollar ended the day slightly ahead after mixed data results coupled with thin market conditions led to it retrace some more of its recent losses following a higher than expected increase in consumer inflation. But those gains were pared back as core inflation, which has been indicated by the Fed as a preferred measure to gauge inflation, was a bit on the tame side while Industrial Production gained less than expected due to sharp drop in automobiles. Housing starts declined slightly but still around very healthy levels as effects of Fed’s rate hikes haven’t been seen yet. Meanwhile oil prices remain well supported as familiar problems fail to subside.
  

• Euro continues to ease back slightly as thin market conditions coupled with lack of any data releases led to another bout of mild profit taking. Break below 1.23 found decent bid interest but its continuous inability to beach the 1.25 mark could lead to further losses and is likely to stay within a broad range. Unlike last year, reluctance is seen on part of traders to aggressively push the Euro higher as it’s a case of ‘once bitten twice shy’ with a higher Euro having its own set of problems of significantly stiffening export demand for the zone.

• Yen after slipping initially on news of a strong earthquake near Tokyo regained its footing as data outcomes remained strong. The Leading Economic index was revised up and more importantly it is back in expansionary territory. However in spite of the recent improvement in fundamentals, further gains have been difficult below 109 as oil prices look set to push even higher while its low yield would also work against it in the current environment where the U.S. interest rates still have room for more raises. For now, it should continue to remain locked in its recent range.
  

• Pound was buoyed by better than expected data releases which helped it remain firm in spite of the Greenback gaining across the board. Consumer inflation recorded its largest annual rate of growth in 8 years while oil prices have increased inflation across the globe but unlike the U.S., the U.K. core rate also rose more than expected. This result adds credence to contents of BoE’s inflation report and has significantly reduced any chances of a rate cut in the near future. Earlier the house price survey showed a lesser than expected decline, pointing towards signs of stabilization in that sector while today’s employment data is eyed to gauge any pick up in the labour market.
  

• Australian Dollar taking cue from other majors has slipped back as the direction of the economy remains a bit mixed and clearer signs are awaited. Any gains beyond 0.7755, which is laced with strong offers up to 0.78, would be difficult leading many to take profits on the approach of these levels. The Australian leading economic index came slightly lower than expected and was below its long term trend with U.S. data eyed for near term direction.

EUR/USD – Yesterday’s low was 1.2296 and high was 1.2372.
The pair closed at 1.2357.

The pair has eased further as lack of any upside momentum is leading to further profit taking as the pair has moved back into neutral territory. Immediate support which also holds decent bid interest lies in the 1.2240-55 zone above which lies a technically mixed interest region with clear bias up to 1.2360. Mild resistance should continue around 1.2410 followed by very strong resistance and offers lined between the 1.2455-1.25 region, with only a break above to raise hopes of a fresh uptrend otherwise it remains vulnerable for further losses. A break below .12240 brings very strong support around 1.2175 which is expected to hold with any moves lower to shift momentum back in the Dollar’s favour.

Key resistance is seen at 1.2410 followed by 1.2455 while support starts at 1.2240 followed by 1.2175.

USD/JPY – Yesterday’s low was 109.04 and high was 109.73.
The pair closed at 109.62.

The pair remains locked in narrow range bound movements with mild bid tone for the Yen and resistance levels for the pair having moved down significantly with mild barrier at 110.15. A break above will bring into focus very strong resistance around the 110.65 mark which is expected to cap any Dollar rally with only a break above 111 to shift the pair back in neutral territory. Immediate support comes up in the 108.70-85 region with a clear break below to accelerate losses for this pair which could only provide distant support around the 108 mark with bottom picking bid interest. This would also shift the Dollar in deep negative territory and reduce chances of its comeback

Key Resistance is seen at 110.15 followed by 110.65 while support starts at 108.70 followed by 108.05.

GBP/USD – Yesterday’s low was 1.8040 and high was 1.8144.
The pair closed at 1.8091.

The pair is buoyed after breaking key resistance barriers and better than expected data. Very strong resistance lies around 1.82 and any upside to challenge this region looks difficult for now. On the downside immediate support is seen around 1.8010 with decent bid interest on any breaks below 1.80, with a decisive break below to bring into focus the strong support region of 1.7940-55 while a clear break below this pivot region would shift the pair back in neutral territory. Offers start getting stronger above 1.8150 with the mixed technical interest down till the 1.8010 mark.

Key Resistance is seen at 1.8145 followed by 1.8205 while support starts at 1.8010 followed by 1.7940.

AUD/USD – Yesterday’s low was 0.7658 and high was 0.7704.
The pair closed at 0.7682.

The Australian Dollar is failing to break above the crucial 0.7755 mark as very strong offers are laced up till the 0.78 region with only a break above this mark raises hopes of a fresh uptrend other wise the pair is likely to be locked in narrow range bound movements or risks losses. Immediate resistance has moved down to 0.7705 while on the downside immediate support has moved up to the 0.7615 mark with a break below bringing decent support and bid interest around 0.7555 with any moves lower to shift the pair back in the Dollar’s favour.

Key Resistance is seen at 0.7705 followed by 0.7745 while support starts at 0.7610 followed by 0.7555

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