Australian FOREX Daily Oulook 19/07/2005

19/07/05 (07:00 GMT)

• Dollar has rallied across the board at the start of today’s European session, after it got yet another boost from data releases with sentiment squarely in its favour. Yesterday the healthy capital inflow data did not necessarily reflect in the price action as traders are looking forward to more important market moving events namely Greenspan’s speech. As a precursor of events to come Greenspan was very optimistic on the economy’s direction, especially the way its been coping with high oil prices. In spite of the fact that net foreign purchases of US stocks remain flat, it is expected to pick up significantly in months to come.

• Euro has finally slipped back below the crucial 1.20 mark and remains vulnerable for further losses. Earlier like the US inflation, figures from the zone were tame, however the yearly figure is still above the ECB’s inflation target and until this remains it would be very hard for the bank to cut rates. Today’s German PPI figures were higher than expectations however given the sluggish economic conditions these costs are not being passed on to consumers. The attention turns to the crucial ZEW economic sentiment surveys both from Germany as well as the Euro Zone.

• Yen has seen volatile moves since yesterday as the Yuan revaluation issue has come back to the fore, thus lending a fair degree support. However data from the land of the rising sun continues to remain on the weak side. This mornings leading economic index was revised down to 36.4 thus the economy remains in a state of contraction. Even the easing of oil prices is not helping the Yen as it has gone above 112.50 with the only chance to stem its decline I a significant pick up in domestic demand.

• Pound fell sharply and has even broken below 1.74 and is close to going towards its lowest levels in nearly two years. Sentiment has gone further into negative territory with two separate house price surveys signaling towards broad based decline in prices. Recent assertion that prices have stabilized were thrown out of the window with the RICS survey declining again which was its longest streak of negative reading in a decade. Tomorrows lending data is eyed to gauge if housing demand still has any degree of support.

• Australian Dollar has performed impressively in staying above the support zone at 0.7450-75, however with no local data to drive this pair and attention on dollars general direction the Aussie is bound to take cue from other majors and slip lower. Healthy demand for commodities persist which is lending a fair degree of support but offers above 0.7555 should prove too strong for it to rally.

FOREX Related Upcoming Economic Release

EUR/USD – Yesterday’s low was 1.2041 and high was 1.2088.
The pair closed at 1.2060.

The pair experienced surprisingly slow movements as it remained trapped within the technically mixed interest region of 1.20. However sentiment remains in the greenbacks favour and the Euro remains vulnerable for further losses. Immediate support is seen around the 1.1940-55 zone, but before that bottom pickers have decent buying interest on any dips just below 1.20. A decisive break below the support zone would accelerate its loses which should bring into focus the crucial pivot support region of 1.1850-75. This region has held well in the past and a break below could make it very hard for the Euro to regain its losses.

Key resistance is seen at 1.2105 followed by 1.2190 while support starts at 1.1940 followed by 1.1875

USD/JPY – Yesterday’s low was 111.49 and high was 112.31.
The pair closed at 111.85.

The Yen has been supported by the Yuan story, thus breaking below decent dollar bids around 111.50. However, very strong dollar buying interest and support lies in the 110.80-95 support zone; a break below this region would shift intra-day sentiment in the Yens favour. While on the upside decent resistance continues around the 112.55 mark, the 112 region has mixed technical interest and patchy volatile moves are likely within that region. A decisive break above 113 could make it hard for the Yen to pare back its losses.

Key Resistance is seen at 112.75 followed by 113.20 while support starts at 111.45 followed by 110.90.

GBP/USD – Yesterday’s low was 1.7455 and high was 1.7557.
The pair closed at 1.7482.

With no factors to push the Pound higher decent resistance around 1.7555 proved too strong and another sell off ensued. It remains vulnerable for further acceleration of losses with immediate support seen in the 1.7360-75 support region, A break below this crucial region could see the pound going towards its lowest level in nearly two years, and this would make it very hard to rebound as it has done in recent times. But if so distant support is seen around 1.7225, while on the upside resistance should continue in the 1.7530-55 zone with very strong selling interest on any break above 1.76.

Key Resistance is seen at 1.7555 followed by 1.7625 while support starts at 1.7360 followed by 1.7225.

AUD/USD – Yesterday’s low was 0.7474 and high was 0.7547.
The pair closed at 0.7538.

The Australian Dollar continues to show surprising resilience with the support zone of 0.7450-75 holding firm for now. However since near term direction is taken from other majors it remains vulnerable for further losses, resistance persists around 0.7555 with any break above likely to bring into focus the very strong resistance zone of 0.7595-0.7610. Strong selling orders lie in the 0.76 region which should make any upside hard for the Aussie. While a break below the support zone would accelerate its losses and bring into focus the 0.7385 pivot mark with decent buying interest around it.

Key Resistance is seen at 0.7555 followed by 0.7595 while support starts at 0.7450. followed by 0.7385.

Kunal Sharma
Forex Analyst

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

Australian Financial Services License 246566

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