Australian FOREX Daily Oulook 25/10/2005

MARKET SUMMARY – 25/10/05

• The Dollar had little reaction overnight to the news that US President George Bush has named Ben Bernanke to succeed Alan Greenspan as chairman of the Federal Reserve. The share market reacted very positively with its biggest daily gain since April 21. The greenback reaction was very benign and over the whole trading session dollar softened modestly against the majors. The States had no major data releases for the market to focus on overnight. Today however, the market has several data releases to deal with and of most significance will be the October Conference board consumer confidence indicator. Economists expect a modest rebound after the weak number in September. Market consensus is looking for around 88.5 versus last months 86.6. Also out tonight is the Richmond Fed survey which has been rising for the last two months as it did not show any weakness in response to the hurricanes and the consequent surge in energy prices. Market consensus is for this number to come in at around 5.0 down from the previous reading of 8.0. Finally existing home sales are expected to decline but from a high level of 7.29 million in August. Market consensus is looking for 7.21 million.
  
• The Euro lifted from its lows of 1.1926 in late Asian trade to 1.2019, before ending New York trade near 1.1980. The rally was attributed to Eurozone August industrial orders which were reported up 7.5%, above the +3.8% consensus.However, this was cancelled out by the widening of the current account deficit, reported at EUR 6.6 billion, up from 4.7 billion in July. Today the focus in Eurozone will be on the release of the October IFO survey from Germany. The consensus view is for the expectations index to remain stable at 95.6.
  

• The Japanese yen continues to trade in the range of 115.00 to 116.00. The Japanese yen rose from lows of JPY115.87 per US dollar to JPY115.06, before ending New York trade near JPY115.50.Some dealers suggested the reason the yen strengthened was due to comments by Chinese official Yu Yonding, (head of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences) that further appreciation of the yuan currency is inevitable.Foreign exchange traders often view the Japanese yen as a freer trading Asian proxy for the yuan. There are no major data releases for Japan today.
  

• The Pound traded in a choppy pace for most of the trading day. It hit a one-month high against the EUR and traded to 1.7720 against the dollar before retreating back down to 1.7680. The data calendar for the UK is very light over the coming week with today’s quarterly CBI Industrial Trends survey, the only release of any note. The monthly series has been trending lower for the past year to stand at -27 in September. However, sterling has weakened since early September, which may see a slight pick up in export orders in October.
  

• The Aussie lifted from lows of 0.7466 to end near the days highs of 0.7513. Aussie surprised many traders with it’s resilience given falling commodity prices as well as heavy selling by US CTAs and US Investment banks. Some traders suggest it could be delayed reaction to PPI data which came out at 1.5%, stronger than the expected 1.3%. There are no major data releases for Australia today.

TECHNICAL COMMENTARY

• Euro – 1.1970

Volatile swings in both directions continue to plague this market. Lower lows and lower highs dominate the short-term picture, which indicates selling pressure is more evident. A move above 1.2075 resistance would end this pattern but only a move above the 1.2160 resistance would signal a potential bullish pattern. On the other had the downside remains well protected with long term support, firstly at 1.1870 followed by 1.1765.

• Yen – 115.50

Consolidation continues between the levels of 115.00 on the downside at 116.00 on the topside. A close below or above these level respectively will indicate the next short term move. Major support remains at 114.10 on the downside while 117.00 will offer some resistance should 116.00 be taken out.

• Pound – 1.7670

The previous resistance level of 1.7650 continues to act as minor support with 1.7425 the major support level. Minor resistance comes into play at 1.7720 with the key level remaining at 1.7817(This level represents the 38.2% retracement of the 1.8501-to-1.7391 decline of Sept.-Oct. and is also near the 1.7814 high of Oct 6).

• Aussie – 0.7500

The recovery last night stalled at .7515 and indicates the rallies are becoming shallower suggesting selling pressure still remains. However, many analysts are not ruling out another test of key resistance at .7543. Support remains at .7440 followed by .7369 (July low), the major support.