Australian FOREX Daily Oulook 18/07/2005

18/07/05 (02:00 GMT)

FOREX – Australian Dollar Market Summary

• Dollar rallied on Friday after a blockbuster manufacturing and production outcome which helped offset the tame producer inflation figure which wasn’t a big surprise since consumer figures released the day before were tame as well. Empire state index rebounded strongly going towards its highest level for the year while Industrial Production had its strongest monthly increase in more than a year with capacity utilization going to its highest level since December 2000. Another unexpected boost came from the Consumer Confidence survey which increased in spite of record high oil prices. Thus sentiment has further strengthened for the Greenback with today’s Capital Inflow eyed keenly.

• Euro did well in staying above 1.20 throughout last week which was largely thanks to speculation of any rate cuts from the ECB subsiding for now. Inflation is expected to inch higher thus likely to keep the ECB’s stance of rates on hold at least till the end of the year, however this wouldn’t stop from the Dollar’s yield advantage to increase further as Greenspan is likely to remain hawkish. Thus the Euro remains vulnerable for further losses with the heavy data calendar from the Euro-Zone this week, eyed with interest.

• Yen’s direction continues to be a bit mixed as data results have been inconsistent with Department Store Sales experiencing its 40^th decline in 43 months, while the result was better than expected and given the current environment of slow demand for Japanese products, further significant pick up in domestic demand is required for the economy to stay on its recovery path. Comments from the U.S. administration to the senate that China is looking to revalue the Yuan in August have so far had minimal effect on price action. For now, Dollar bids continue to remain strong around 111.50.

• Pound took cue from Dollar’s general direction and with no U.K. data releases, the negative sentiment around the Pound as well as strong offers above 1.76 pushed it lower. While in yet another confirmation of the soft landing in the Housing market, the Rightmove House Price survey recorded a larger than expected fall in property prices making another strong case for BoE to reduce rates next month. For now the focus is on mid week events with BoE meeting minutes and Retail sales.

• Australian Dollar is trapped between strong offers above 0.7555 and decent bid interest around 0.7450 for now, however it is more likely to push further down. Local data will be eyed this week to gauge the direction of the economy which like New Zealand is expected to point towards slower growth outlook for the second half of the year.

FOREX Related Economic Data Released

FOREX (Foreign Exchange) Technical Analysis

EUR/USD – Friday’s low was 1.2020 and high was 1.2135.
The pair closed at 1.2032.

Dollar surged on strong data but 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 1.1920-35 support region with mixed technical interest around that mark and decent bids around 1.19. Any foray below would bring into focus the crucial pivot support region of 1.1850-75 which has held well in the past, a break below would send it to nearly two year lows. It is also likely to accelerate losses and shift sentiment solely in the Dollar’s corner. On the upside resistance should continue in the 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.

Key resistance is seen at 1.2155 followed by 1.2240 while support starts at 1.1940 followed by 1.1875

USD/JPY – Friday’s low was 111.75 and high was 112.41.
The pair closed at 112.16.

The pair remained within its recent range which was within the technically mixed interest zone of 111.50-112.45. 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 – Friday’s low was 1.7507 and high was 1.7635.
The pair closed at 1.7507.

Sentiment for the Pound remains weak and it is vulnerable for further losses, immediate support is seen in the 1.7455-70 support zone. A decisive break below could accelerate its losses and could lead to moves towards the 1.7375 pivot support mark, which has decent buying interest around it. On the upside the 1.75 region has mixed technical interest with strong offers lined above 1.76. A decisive break below 1.7350 would make it very difficult for the Pound to reverse its losses.

Key Resistance is seen at 1.7610 followed by 1.7695 while support starts at 1.7475 followed by 1.7405.

AUD/USD – Friday’s low was 0.7473 and high was 0.7535.
The pair closed at 0.7487.

The Australian Dollar remained well within its narrow range as decent bids in the 0.7450-75 support zone held firm for now. A decisive break below this support mark could accelerate losses towards the 0.7375-90 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 it. 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 0.7595 while support starts at 0.7450. followed by 0.7375.

Kunal Sharma
Forex Analyst

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

Australian Financial Services License 246566

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