Australian FOREX Daily Oulook 21/09/2005

21/09/05 (06:00 GMT)

• Dollar rallied across the board on the sheer relief of the Fed raising interest rates by 25 bps as well as having a relatively hawkish tone to their accompanying statement. However the Dollar has pared back most of its gains in the Asian session on the combination of technical factors as well as fears that Hurricane Rita has the potential to cause much greater damage than Katrina. Oil prices are rising as more oil rigs have shut down their operations compared to the previous hurricane based on their prior bitter experience and forecasts. But at the same time if the Dollar can manage to weather this storm both literally and figuratively, then based on the hawkish minutes of the Fed more rate hikes are in the offing in the next two meeting before year end with 4.25% the rate and Dollar should remain well supported.

• Euro continues to find very strong bottom picking bid interest around 1.21 and hurricane fears has helped it go back above 1.22. But it cannot hope to rally significantly just on the basis of the negatives of high oil prices for the Dollar, it needs steady fundamentals from its side which at the moment are not easy to come by. The zone”s as well as Germany”s Economic Sentiment survey declined much more than expected as the current high oil prices have started affecting one and all. Another reason for the decline was the uncertainty of future economic policies in Germany given the close election results but if Merkel can manage to form a willing coalition then a relief rally could eventuate.

• Yen is a bit under pressure while falling on its crosses as well, with further signs that consumer spending is failing to pick up. Convenience store sales remained in negative territory as high oil prices continue to hit the consumers hard while the benefits of the recent impressive recovery in corporate earnings as well as the growing surge of foreign interest in Japanese assets hasn”t trickled down the average consumer”s pocket. The focus is also on tomorrow”s Trade Balance outcome which should show a considerable shrinking in the surplus due to the high import costs of oil while mixed global demand is stiffening exports.

• Pound like the Euro has been helped by key technical levels which is helping it rebound strongly back into the 1.80 region. The immediate focus is today”s release of the minutes of Bank of England”s last meeting where they kept rates on hold. The vote count of that decision as well as comments from the members will be keenly scrutinized for future rate outcomes. They are caught between rising inflationary pressures and slightly improved labour market compared to the failure of consumer spending to pick up as well as mixed signals of the housing market. But its yield advantage over the Dollar is definitely diminishing fast with the U.S. rates to cross it by early next year.

• Australian Dollar is currently locked between negatives emanating from its yield advantage over the U.S. is dwindling as well as consumer spending is remaining weak compared to the positives of commodity prices soaring with demand staying steady and the outlook for Aussie exports looking very promising. It has strong resistance within the 0.77 region with selling orders lined up to 0.78 as near term cue is taken from other majors.

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FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2110 and high was 1.2189.
The pair closed at 1.2116.

The pair is still resonating within the 1.21 region but further losses look likely after the Fed”s decision. The sentiment and momentum is the Greenback”s favour with immediate support coming up around the 1.2070 mark with mild bottom picking bid interest just below 1.21. A clear and decisive break below is likely to accelerate losses before strong support emerges in the 1.2005-15 region which is expected to provide a fair of resilience if challenged and decent sized bids lie just below 1.20. Any moves lower than this would shift the Euro in deep negative territory and clear the way for a fresh uptrend for the Dollar. On the upside, mild resistance continues around 1.2215 with mild offers just above 1.22 followed by strong resistance around 1.2275. Any break higher is expected to cap gains within the 1.23 region with strong offers lying there.

Key resistance is seen at 1.2215 followed by 1.2275 while support starts at 1.2070 followed by 1.2000.

USD/JPY – Yesterday’s low was 111.12 and high was 112.01.

The pair closed at 111.88.

The pair after its strong resistance around 111 broken is now gaining further ground with 112 touched but decent sized offers lie above it which might stiffen any gains from here with immediate resistance seen around 112.35. A break above brings a mixed interest region which lasts up till 113.10 where very strong resistance exists and offers are also strong above it, with any gains expected to be capped within this region. On the downside, key support levels have moved up with 111.05 now posing as immediate support followed by strong support and decent bid interest mark of 110.55. A break below this mark would send the Yen back in its 109-111 familiar range.

Key Resistance is seen at 112.35 followed by 113.10 while support starts at 111.05 followed by 110.55.

GBP/USD – Yesterday’s low was 1.7959 and high was 1.8081.
The pair closed at 1.7970.

The pair hasn”t broken clearly below 1.80 but Dollar cannot rally decisively before breaking below the 1.7955-70 support region which holds decent bid interest for the Pound and could help it stay range bound with mixed interest seen till 1.81 where resistance lies around 1.8105 followed by further mixed interest till very strong resistance crops up around 1.8225-40 region which has held well in the past. A clear break above it will set the trend for a move towards 1.84 where very strong offers lie and any gains would be capped around it. On the down side a break below 0.1.7955 could accelerate its losses towards 1.7875-90 region which should cap losses. within the 1.80 region.

Key Resistance is seen at 1.8105 followed by 1.8225 while support starts at 1.7970 followed by 1.7890.

AUD/USD – Yesterday’s low was 0.7653 and high was 0.7714.
The pair closed at 0.7667.

The Australian Dollarremains at a pivotal stage and has eased back below 0.77 but at the same time is finding good support above the 0.7645 mark. Any foray above 0.77 should continue to lead to selling interest with immediate resistance around 0.7735 and any break above 0.7755 to intensify the strength of the selling orders. On the downside a break below the support mark could accelerate losses before strong support is encountered in the 0.7590-0.7610 region with a clear break below to shift the momentum back in the Dollar’s favour. While only a break above 0.78 raises hopes of a fresh uptrend towards 0.80 otherwise it should remain in narrow range trading.

Key Resistance is seen at 0.7735 followed by 0.7775 while support starts at 0.7645 followed by 0.7590.

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