Australian FOREX Daily Oulook 17/10/2005

• Dollar fell on Friday and was still within its recent range play but the extent of weakness in the data outcomes pushed it a bit beyond the range and its continuous inability to make a significant rally could lead to a fresh downtrend. Inflation data came on the wrong side for the Dollar as in spite of the headline figure surging to a 25 year high due to high oil prices, the core inflation was much tamer than expected while Retail Sales came in lower than expected and only increased due to high gasoline prices. Industrial Production was expected to decline given that the hurricanes disrupted activity but the fall was more than expected as it recorded its largest monthly drop since 1982. Consumer Sentiment also fell against expectations of an increase with high oil prices to blame. Dollar has started the new week by slipping across the board in the Asian session.

• Euro has broken back into the 1.21 region as its recent strong resilience in the face of a Dollar onslaught and maintenance of 1.19 as a bottom has given confidence to speculators to push it higher. Also the data from the Euro-zone has been comparatively better and with inflation in Italy and Spain also coming in higher than expected, speculation is rife that the ECB might increase interest rates in their next meeting. For now, they are held back by fears of growth slowing further but recent signs of pick up are encouraging and further signs of stabilization especially from nations like Italy could make the ECB’s decision easier.

• Yen has gained on the back of Dollar’s broad weakness but has pared back the gains on its crosses as uncertainty of demand for Japanese exports particularly from the U.S. and high oil prices is hurting the second largest importer of oil. Industrial Production was revised slightly lower but optimism is emanating from the steady increase in domestic demand which is expected to offset the slowing global demand and keep the economy on track. Meanwhile, the Wholesales Goods Price index rose due to surging oil &amp raw material prices and with core inflation rising as well, BoJ’s ultra loose monetary policy is set to end early next year.

• Pound zoomed higher breaking above the 1.77 mark but decent selling orders lie within that region and U.K. fundamentals remain on the weak side. For now support is derived from the fact that a rate cut looks distinctly unlikely as BoE members main focus is on rising inflationary pressures. Corporate real money demand for the Pound also helped it while House Prices are showing signs of stabilization as a survey showed that prices rose for the first time in four months. The focus shifts to Inflation data this week which is expected to surge but GDP is expected to decline as consumer spending fails to pick up.

• Australian Dollar closed comfortably above 0.75 and remains well supported on dips below that mark while Dollar’s weakness is also helping it. Rates are expected to stay on hold with Treasurer Costello stating that in spite of a surge in oil prices, inflation is expected to stay below their target. Meanwhile the New Zealand Dollar got a boost this morning as it heads back towards 0.70 as inflation came in higher than expected, thus increasing the likelihood of RBNZ to raise rates to 7% next week.

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FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Friday’s low was 1.1980 and high was 1.2107.
The pair closed at 1.2073.

The pair managed to rebound strongly once again which could start an uptrend but for now has mild selling orders above 1.21 with decent resistance around 1.2140. A break above will bring into focus strong resistance in the 1.2195-1.2210 zone with strong selling orders laced all the way up to 1.23. On the downside, decent bid interest remains just below 1.20 with immediate support at 1.1975. Decent bid interest lies below it with very strong support lying in the 1.1890-1.1910 region. A clear break below this region could shift the Euro into deep negative territory.

Key resistance is seen at 1.2140 followed by 1.2210 while support starts at 1.1975 followed by 1.1910.

USD/JPY – Friday’s low was 113.86 and high was 114.89.

The pair closed at 114.06.

Yen pared back its losses but Dollar has bid interest just below 114 with immediate support has now moved down to 113.75. A break below this strong support could accelerate the pair’s losses before strong support is seen around 113.15 and very strong bottom picking bid interest just below 113. On the upside mixed interest lies within the 114 region with resistance around 114.75 and decent selling interest on any moves above 115. Very strong resistance lies in the 115.20-35 region which is expected to cap any gains.

Key Resistance is seen at 114.75 followed by 115.25 while support starts at 113.75 followed by 113.15.

GBP/USD – Friday’s low was 1.7484 and high was 1.7706.
The pair closed at 1.7681.

The pair has rebounded impressively breaking back above 1.77 but decent selling orders lie within that region with immediate resistance around 1.7740. The pair prone to exaggerated moves can break above 1.78 where resistance is very strong around 1.7815 and any gains are expected to be capped within this region. On the downside, a swing back to immediate support around 1.7590 is likely with decent bottom picking bid interest just below 1.75 with very strong support around 1.7475. Another move towards this mark could accelerate the Pound’s losses and make it hard fro it to reverse its losses.

Key Resistance is seen at 1.7740 followed by 1.7815 while support starts at 1.7590 followed by 1.7475.

AUD/USD – Friday’s low was 0.7491 and high was 0.7540.
The pair closed at 0.7521.

The Australian Dollarcontinues to find decent bid interest in the 0.74 region with immediate support around 0.7475 and decent bid interest just below 0.7450 and strong support around 0.7420. A break into the 0.73 region will shift the Aussie in deep negative territory. 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 0.7475 followed by 0.7420.

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