Australian FOREX Daily Oulook 22/09/2005

22/09/05 (05:00 GMT)

FOREX – Australian Dollar Market Summary

• Dollar is slipping as nature decides to spoil its party with Hurricane Rita on its way and since the impact is not expected till the weekend, pressure is likely to remain on the Dollar till then. The worrying factor is that the strength of this hurricane is expected to be more powerful than the recent one and if the impact is on the same scale than it could leave a deep negative impact in more ways than one. Key oil refineries have already shut shop as a precaution while data wise today’s jobless claims is the main focus. More Katrina victims would have filed their claims but a ballooned outcome could lead to the Dollar slipping further especially now since the new hurricane has the potential to add to the jobless claims in months to come. Meanwhile in a survey of American CEO’s, Hurricane Katrina is set to have had a significant but not a overwhelming impact on their businesses. Thus needless to say, if Hurricane Rita follows suit then even the Fed would be forced to pause which would very bearish for the Dollar.

• Euro is obviously being helped by the prospect of another Hurricane hitting the U.S. which for now has put a veil over Germany’s political problems as both parties remain deadlocked trying to strike the best possible coalition. Meanwhile business leaders have urged both parties to set aside their differences and concentrate on reforms which are so badly needed given the current sluggish conditions. Earlier data was mixed with the zone’s current account deficit widening more than expected but this was offset by the French Consumer spending coming in much higher than forecasts which is a sign of welcome relief given the sluggish condition of the economy. It remains to be seen if this rise is a cyclical seasonal once off result or a start of a steady recovery but either way high oil prices would be a major dampener on any prospective recovery.

• Yen has fallen across the board after this morning’s much weaker than expected data outcomes. Trade surplus has shrunk much more than estimated due to high import costs of oil while in spite of the impressive rise in exports, foreign demand is now threatened by high oil prices curbing global spending especially among U.S. consumers. This double blow of further increases in oil prices and slowing global demand threatens to put Japan’s trade balance in deficit region.Meanwhile the Tertiary Industry index has also declined more than expected indicating weakness in the service sector but seasonal factors are also a prime reason for the decline with steady pick up in consumer spending expected to keep the economy on track.
  

• Pound apart from being helped by Dollar’s general weakness also got a boost after the minutes of Bank of England’s last meeting were released. It was unanimous 9-0 vote to leave rates on hold with concern of inflationary pressures rising further amid high oil prices the main reason behind their decision. However given the current mixed conditions both in the domestic as well as the global economy, it wasn’t a surprise that members had conflicting views on the outlook. Consumer spending remains on a very weak footing and high oil prices are not helping, unless a significant improvement is seen a rate cut can only be delayed but not avoided. Today’s CBI industrial trends survey should continue to project weakness in the manufacturing sector.

• Australian Dollar remains locked between conflicting fundamental factors and mixed technical interest seen around current levels. Given its high correlation with gold prices which continue to sky rocket having reached $475, the Aussie too is finding decent support on any pullbacks. The hurricanes and sky high oil prices are bound to slow global growth which would translate to weakness in demand for Aussie commodities, especially the emerging nations of Asia are exposed to sharp pullback in demand with the Aussie bound to suffer as a result.

FOREX Related Upcoming Economic Release

FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2112 and high was 1.2268.
The pair closed at 1.2261.

The pair has broken key resistance around 1.22 on hurricane fears but German political uncertainty is leading to mixed direction with immediate resistance seen in the 1.2260-75 region. A clear break above will bring into focus strong resistance around 1.2315 with decent sized offers lying above this mark and selling orders intensifying above 1.2350 lined all the way up to 1.24. A break above this crucial mark would shift the momentum back in the Euro’s favour. On the downside, immediate mild support lies around 1.2145 but mixed interest is seen within the 1.21 region with very strong support to continue in the 1.2090-1.2105 region and a break below will shift the bias to the Dollar with strong Euro bids around 1.20 the next focus.

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 110.97 and high was 111.96.

The pair closed at 111.06.

The pair after its strong resistance around 111 broken is now gaining further ground with 112 briefly broken 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 1.8131.
The pair closed at 1.8029.

The pair prone to exaggerated movements was buoyed after finding strong bid interest below 1.80 but has mixed interest with no clear bias line dup to 1.82. Immediate resistance comes up around 1.8170 with mild offers lying just above 1.82. Strong resistance lies 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 immediate support continues around the 1.80 mark with decent bid interest below it. Strong support lies in the 1.7955-70 region with only a clear break below to raise hopes of a strong Dollar rally.

Key Resistance is seen at 1.8175 followed by 1.8240 while support starts at 1.8000 followed by 1.7955.

AUD/USD – Yesterday’s low was 0.7666 and high was 0.7728.
The pair closed at 0.7724.

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 0.7610.

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