Australian FOREX Daily Oulook 18/10/2005

18/10/2005

Market Summary

The US Dollar commenced its rally against major currencies in Asian trade on Monday. This rally continued in the London and New York session despite a weaker than expected headline number on Empire Manufacturing. This would be due to the components within the index actually being stronger than the headline number suggested. Also helping the dollar was good buying interest by Japanese investors. The market now turns its attention to PPI (Producer Price Inflation) due out tonight &amp we keep an eye out for expected hawkish comments by Fed officials.

The Euro traded lower in London and New York closing around 1.2020, marginally above its low of 1.2012. With no key data out in Eurozone, the currency will continue to take its direction from US data.

The Japanese yen also suffered from dollar strength and closed very near the day’s low of 114.95 in the New York session. This close and the lack of data in Japan today, gave the market the impetus required to take dollyen above the key level of 115.00.

The Pound failed to make any gains despite the improvement in the RIC house price index. Closing weaker at 1.7543 the market is concerned about the UK’S future economic prospects and expects another rate cut before year end.

The Aussie continues to struggle against the dollar with failure to break key resistance at .7550. The currency problems were further compounded yesterdays better than expected CPI data in New Zealand, which created large AUD/NZD selling. Aussie closed near its lows at .7482 and will take direction from US tonight with little in the way of data locally.

Technical Levels

EUR/USD – 1.2000

After the sell of overnight the first minor support comes in at 1.1960/80, followed by major support at 1.1870/1.1900. Resistance is seen at 1.2040/60 followed by 1.2120/40.

USD/JPY – 115.25

The break of 115.00 could signal for move higher, however still minor resistance to be cleared at 115.50 followed by 116.80/117.00. Downside support initially comes in at 114.50 followed by 113.60/80.

GBP/USD – 1.7505

Initial support is now seen at 1.7450 followed by 1.7380/1.7400. Resistance is at 1.7550 and then 1.7600/20.

AUD/USD – .7480

Initial support comes in fairly close to market at .7450 with major support at .7360/80.

Rallies will find resistance firstly at .7540/50 followed by .7610/20.

Rory Kennedy

Sydney Dealing Desk

E-mail: rory@easy-forex.com