Australian FOREX Daily Oulook 20/07/2005

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20/07/05 (02:00 GMT)

• Dollar rallied across the board but gave back most of its gains especially against the Euro as the market is looking to adopt a neutral position ahead of Greenspan’s testimony (14:00GMT). The volatile moves emanated from the conflicting interpretation of coming events by the market. Some quarters believe that Greenspan may not be as hawkish as anticipated but given the recent pick up in the economy, it would be a surprise if he does not express strong optimism for the economies direction. The slight concern for the dollar also emanates from oil prices remaining at such high levels, which could cut into the growth forecasts in the coming months. However, this is a global problem and sentiments as well as fundamentals continue to show the Dollar as the most attractive option for now.
  

• Euro managed to rebound impressively after slipping into the 1.19 region and position squaring ahead of Greenspan’s speech meant that it ended the day around the same level that it started. The robust result in the German ZEW economic sentiment index wasn’t enough to lend support to the Euro as Germany as well as France are the only two nations out of the 12 nation Euro zone to witness some degree of pick-up in Economic conditions. In spite of a weaker Euro, export orders are still failing to pick up in other nations while domestic demand has also stiffened with industrial production from the zone declining more than expected. Resistance continues above the 1.21 region with US events eyed for direction.

• Yen has slipped across the board as economic data continues to be depressing and the lowest yield offered by it compared to others continues to project it in a very poor light, in the current environment of interest rates being one of the major driving factors for prices. In the minutes of Bank of Japans meeting two members voted for lowing the liquidity target set by the bank, due to the recent shrinking of surplus. Attention is also focused on key data from china and the effect it would have on the timing of Yuan revaluation. For now the Yen would remain hard pressed to pare back its losses.

• Pound crashed further with the rebound by the Euro and the Swiss Franc having no effect on it, as the attention is focused on the minutes of BoE meeting released today. Apart from slow economic growth, the terror attacks just before its last meeting has increased the likelihood of more members voting for a rate cut which would be very bearish for the Pound. Tomorrow’s retail sales would also be a major focus but given the further deterioration in the housing market and a dovish release could make it very hard for the Pound to rebound even if sales pick up.
  

• Australian Dollar unlike the Yen has sound local fundamentals which is helping it maximize the immense opportunities rising from China’s strong growth. In spite of a global slowdown demand for commodities from emerging economies hasn’t declined, thus keeping Australia’s exports around healthy levels. Direction is taken from the dollars general movements but for now it remains locked within its recent range with the resistance around 0.7555 and mild support above 0.7450.

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FOREX (Foreign Exchange) Technical Analysis

EUR/USD – Yesterday’s low was 1.1952 and high was 1.2061.
The pair closed at 1.2028.

The Euros rebound after slipping below 1.20 was very impressive and for now it has gone back towards the mild resistance region of 1.2090-1.2115. Decent selling orders lie around this region with any break above would bring about mixed technical interest within the 1.21 area. 1.22 holds very strong resistance and a decisive break above this mark, could shift intra day sentiment in the Euros favour. On the downside support continues in the 1.1940-55 region. However the support is not strong and a decisive break below will accelerate its losses towards the crucial pivot support region of 1.1850-75. Any foray below this mark would make it hard for the Euro to rebound.

Key resistance is seen at 1.2125 followed by 1.2210 while support starts at 1.1940 followed by 1.1875.

USD/JPY – Yesterday’s low was 111.84 and high was 112.96.
The pair closed at 112.89.

Sentiment has worsened for the Yen as it has declined across the board with key resistance levels for this pair easily broken. It risks further acceleration of losses as it has broken above the 113 region. The next strong and pivot resistance mark is around 114 with mixed technical interest within the 113 region. Mild dollar bids have moved up to the 112.40-55 zone, with any break below 112 likely to lead to decent buying interest. Strong support has moved up to 111.55 mark with any break below likely to shift sentiment in the Yens favour.

Key Resistance is seen at 113.35 followed by 114.05 while support starts at 112.45 followed by 111.50.

GBP/USD – Yesterday’s low was 1.7340 and high was 1.7484.
The pair closed at 1.7367.

The Pound has failed to benefit from the Euros rally as it has replaced the latter by being the currency more likely to be sold on any mild rally. It is within the 1.73 region and further losses are likely, it would be very hard for it to rebound from here on with mild selling interest above 1.7455. Any break above 1.75 would lead to strong selling interest however direction is derived from today’s release of BoE meeting minutes. A decisive break below the support mark at 1.7325 could accelerate its losses with next distance support around 1.7255.

Key Resistance is seen at 1.7455 followed by 1.7520 while support starts at 1.7325 followed by 1.7255.

AUD/USD – Yesterday’s low was 0.7479 and high was 0.7540.
The pair closed at 0.7503.

The Australian Dollar continues to be well supported and is hovering around the 0.75 mark, with the resistance around 0.7555 holding well for now. A break above would bring into focus the very strong resistance zone at 0.7590-0.7615. Any foray into the 0.76 region will lead to strong selling interest. On the downside the support zone at 0.7450-75 continues to hold well with the decisive break below likely to accelerate its losses towards the 0.7385 pivot support mark. The pair is likely to stay range bound till further direction is derived from US data.

Key Resistance is seen at 0.7555 followed by 0.7615 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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