Australian FOREX Daily Oulook 27/07/2005

27/07/05 (05:00 GMT)

• Dollar held firm and gained further as the market changed track after the Chinese Central Bank dismissed any talk of their modest revaluation move being a precursor to more aggressive moves, at least not in the near future. With other regions fundamentals continuing to be comparatively much weaker and yield factor in its favour, sentiment remains strong for the Greenback. The unexpected drop in Consumer Confidence data prevented further gains however it is more of a gauge of oil price movements whose direction remains a bit mixed. Durable Goods data is eyed keenly today.

• Euro finally slipped back below 1.20 but a combination of below par U.S. data and positive data from the zone has helped it to stabilize around 1.20 for now but it remains vulnerable for further losses. German IFO Business Climate result was strong with both the Current Assessment and Expectations index increasing. It continues to benefit from a weaker Euro boosting exports while pick up in global demand led by the U.S. is also a key supportive factor. However this pick up has so far been confined to Western Europe with other nations economies remaining in a sluggish state.

• Yen slipped broadly, as needless to say the comments from China affected it the most and it has now pared back all it post revaluation gains and is back to square one. The shift of focus back to yield play makes the Yen appear in a very poor light with Bank of Japan maintaining its zero interest rate policy and reserve target was also left unchanged. The attention is also focused on data from China, as officials have made it clear that Yuan’s direction or further appreciation is data dependant. A decisive foray above 113 would make it hard for the Yen to reverse its losses.

• Pound fell further as yet another day of below par data results increased the bearish sentiment around it with Bank of England very likely to cut interest rates in their meeting next week. However, in spite of the decline the pace of the drop has stabilized as like the Euro-zone, the U.K. is witnessing a pick up in exports but weakening domestic demand is the main concern. Housing data is eyed to check for any signs of stabilization but U.S. data is eyed for further direction
  

• Australian Dollar slipped back towards 0.7550 support level and remains vulnerable for further losses after consumer inflation rise was lower than expected. This result coupled with signs of a slowing economy dismisses the chances, if there were any, of the RBA raising interest rates. The Chinese denial to further revalue the Yuan also led to a few positions being squared and shifting the focus back on Aussie’s decreasing yield advantage against the Greenback. New Zealand dollar followed suit and slipped back as its trade deficit widened unexpectedly.

EUR/USD – Yesterday’s low was 1.1980 and high was 1.2062.
The pair closed at 1.2017.

The pair remains weak and vulnerable for further losses with sentiment remaining in negative territory. Bottom picking interest and mild support remains on dips towards 1.1975-90 but a break below will accelerate its losses with decent buying interest around the 1.19 mark. A decisive break below this mark will lead to moves towards the crucial pivot region of 1.1850-75, the Euro has managed to make an impressive recovery from this level in the past and a break below would send it towards its lowest level in 2 years. On the upside decent selling interest lies on any moves towards 1.21 with strong resistance having moved down to 1.2155-70 with only a break above 1.22 to shift intra day sentiment

Key resistance is seen at 1.2105 followed by 1.2175 while support starts at 1.1940 followed by 1.1875.

USD/JPY – Yesterday’s low was 111.57 and high was 112.61.
The pair closed at 112.51.

Yen has lost further ground with nearly all its post Yuan gains are lost and sentiment back in negative territory. Resistance around 112 has been broken with next level in the 112.90-113.10 region with decent selling interest around that region. A decisive break above 113 would shift the sentiment back in the dollar’s favour and make it very hard for the Yen to reverse its losses. On the downside support has moved back up to 111.55-70 region with any moves towards 111 or brief dips into 110 region should lead to strong Dollar buying interest.

Key Resistance is seen at 112.95 followed by 113.55 while support starts at 111.75 followed by 111.40.

GBP/USD – Yesterday’s low was 1.7348 and high was 1.7460.
The pair closed at 1.7373.

This pair remains in deep negative territory and is failing to reverse its losses with immediate support seen in the 1.7320-35 region holding well for now. Further losses look likely but data outcomes are eyed for direction with decent bottom picking buying interest seen around 1.73 but a break below should bring into focus the strong support zone of 1.7240-55 into focus. On the upside, mild resistance lies in the 1.7405-20 zone with a break above bringing into focus the 1.7475 strong resistance mark with strong selling interest above it. Only a break above 1.75 would shift intra day sentiment in the Pounds favour, otherwise it remains vulnerable for further losses.

Key Resistance is seen at 1.7425 followed by 1.7495 while support starts at 1.7315 followed by 1.7245.

AUD/USD – Yesterday’s low was 0.7568 and high was 0.7617.
The pair closed at 0.7581.

The Australian Dollar has slipped back with the very strong offers above 0.7650 proving too strong to be breached. Mild support is seen in the 0.7530-45 zone but it remains vulnerable for further losses. A break below 0.75 is expected bring some buying interest with stronger support around 0.7475 but a loss of that mark could accelerate its losses. On upside resistance has moved down to 0.7610-25 zone with very strong resistance and selling interest above 0.7655.

Key Resistance is seen at 0.7615 followed by 0.7655 while support starts at 0.7530 followed by 0.7470.

Kunal Sharma
Forex Analyst

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

Australian Financial Services License 246566

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