Australian FOREX Daily Oulook 18/11/2005

MARKET SUMMARY – 18/11/05(03.00GMT)

• The Dollar traded weaker overnight against the major currencies on the back of softer economic data out of the States. Housing starts fell from a 21 month high in September of 2.219 million units to 2.014 million in October. This was slightly weaker than market expectations which centered on 2.06 million units. Any sign of weakness in the housing market is of concern as it has the potential to depress US growth expectations for the coming year and reduce the scope for the Fed tightening in 2006.The Philly Fed index fell to 11.5 in November from 17.3 in October, well below Wall Streets median forecast of 15.3. This level is still consistent with a robust outlook for the manufacturing sector. On the positive side, jobless claims fell more than expected and are a sign that the labour market is not as weak as the October payrolls report suggested. The last week has seen the dollar become less responsive to data releases, which is due to uncertainty for the outlook of US activity and inflation having receded.
  

• The Euro traded to a low of 1.1644 in London before trading back up to a high of 1.1764 in the New York session. The Euro closed around 1.1745 level. The Euro benefited from the softer economic data out of the States and brushed off the S&amp P report, which warned that France had slid to the bottom of the AAA class.This assessment is based on key fiscal indicators, where France compared unfavorably to its peers. Still in France, later today sees the release of GDP with expectations centered on 0.7%
  

• The Japanese yen weakened to JPY119.05 per US dollar but recovered to close at JPY118.55. The 2 day BOJ board meeting concludes today with economist not expecting any changes to monetary policy. More importantly though will be whether Governor Fukui responds to the governments attack on the BOJ’S independence when he speaks later today.
  

• The Pound traded in a range of 1.7150 to 1.7230 in the overnight session. Economic figures reported earlier in the day showed that the retail sales figure rose 0.2% last month as anticipated by economists, and there is no indication about the direction of the future interest rate.
  

• The Aussie traded lower initially to 0.7295 in the London session, before recovering to trade as high as 0.7350 in the New York session. The Aussie closed around 0.7340 and was buoyed by a strong gold price, weak economic data out of the States and Aussie cross buying.
  

TECHNICAL COMMENTARY

• Euro – 1.1720

The 1.1644 level takes on more significance as Euro bounce impressively from that level. However, the underlying downtrend in the Euro remains clearly intact, and a breach of the 1.1644 trend low would most likely see a test of the key 1.1588 area. Important resistance is located at 1.1773, the Nov 14 high where a break is minimally required to signal a short-term base.

• Yen – 119.10

The break to the highest levels seen since Aug ’03 reinforces the likelihood of extended gains towards 119.83, the high from Aug 19, 2003, then 120.73, the peak from Aug 1, 2003. Near-term support resides at yesterday’s 118.30 low, but a loss of Nov 9’s 116.86 low is required to threaten the advance.

• Pound – 1.7163

Support is not located until 1.7091 which is relatively close to the psychological 1.7000. Topside resistance from the 1.7309 (Tuesday’s low) to 1.7392 (Tuesday’s high) congestion. This zone also contains the 61.8% retracement of the current leg down of the bear market from 1.7514 (Nov 10 high) at 1.7371.

• 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.