Australian FOREX Daily Oulook 27/09/2005

27/09/05 (03:00 GMT)

• Dollar pared back some of its gains but remains supported as well, oil prices soared again to the surprise of many as production in the Gulf of Mexico region is still staying shut with the damage to key refineries a bit more than initially estimated. The uncertainty continues as damage to electrical lines has led to none of the operators being sure as to when the refineries would start operating. Earlier the Dollar was also put under pressure by Fed’s Chairman Greenspan’s speech as he warned that largely speculative buying may be driving up house prices and creating a risk for the U.S. economy. The main problem of course are the unconventional methods of mortgage products offered which is bringing in unqualified buyers thus driving the prices up further. However for now housing market remains on a strong footing with existing home sales going to its second highest level ever.

• Euro found good bid interest around 1.20 on the combination of good technical support, U.S. refinery problems as well as upside surprise in the data. Italian Industrial Orders came way above expectations as it is finally experiencing the benefits of a weaker Euro boosting export orders while industrial sales were also stronger. This result raises hopes of a recovery in the sluggish Italian economy and with the Euro likely to fall further, exports should keep increasing at a steady pace although high oil prices threaten this recovery. The higher than expected inflation in Germany further confirms the fact that ECB is likely to stay on hold in the foreseeable future in spite of slow growth. The focus shifts to today’s German consumer and business confidence surveys which are expected to decline on high oil and energy price concerns.

• Yen has fallen further after its initial buoyancy with optimistic results in the survey of large manufacturers was offset by very poor results in National department store and supermarket sales. Recent Improvement in the political scene and corporate confidence has been well documented while the strong run on the Nikkei has also lend good support to the Yen, however an improvement in the sluggish consumer confidence and spending sector hasn’t been so far which is not a surprise given the current high oil prices. This morning’s Corporate Service price index dropped which was its 59^th month of consecutive decline a steady increase is to be seen in the index for BoJ to change its monetary policy stance.

• Pound has fallen below the 1.77 mark taking cue from Dollar’s general direction as it remains under pressure on the yield factor. Hawkish comments from U.S. Fed’s Moskow indicating that there is more room to raise rates adds another strong case for U.S. rates to be around 4.25% by year end. Today’s lending data from the U.K. is likely to indicate that home buyers that were waiting for some sort of reduction in rates have retuned after the recent rate cut and mortgage approvals and consumer credit both are likely to increase with inflationary pressures should keep rates on hold till the end of the year.

• Australian Dollar has eased back but rise in oil prices and the uncertainty associated with it, have led to Gold prices inching back up after an initial bout of profit taking while Copper prices also rose and with no sign of decline in export demand, the Aussie’s losses could be stiffened. Earlier this morning, the Kiwi Dollar has fallen across the board as its annual trade deficit widened to a record high due to high import costs of oil.

FOREX Related Upcoming Economic Release

FOREX (Foreign Exchange) Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.2011 and high was 1.2080.
The pair closed at 1.2073.

The pair has finally broken decisively below the key 1.21 mark after nearly two months and losses have accelerated towards 1.20 where decent bid interest is expected. A clear break below has the potential to further accelerate losses towards the strong support mark of 1.1910 with decent id interest down till 1.890. A break below will shift the Euro in deep negative territory and make it very hard to pare back its losses. On the upside, mild resistance has now moved down to the 1.2145 mark with a break above to bring mixed interest till the 1.2275-1.23 region where resistance is very strong and gains are expected to be capped around it.

Key resistance is seen at 1.2145 followed by 1.2275 while support starts at 1.1990 followed by 1.1910.

USD/JPY – Yesterday’s low was 112.09 and high was 112.59.

The pair closed at 112.33.

The pair finally broken decisively above the 112 mark with mixed interest seen till the 113 mark which could lead to slow movements. The 112 region is littered with bid and offers with strong resistance seen in the 113.15-30 region with a clear break above to shift the Yen into deep negative territory. On the downside, immediate support has moved up to the 111.55 mark with very strong bid interest on any break below 111 with strong support around it. Inability of the Dollar to break above 113 could see the pair resonating within the 111-113 region.

Key Resistance is seen at 112.75 followed by 113.30 while support starts at 111.55 followed by 111.05.

GBP/USD – Yesterday’s low was 1.7702 and high was 1.7796.
The pair closed at 1.7779

The pair has broken down with key support levels breached and looks vulnerable for further losses. It needs to clear mild bottom picking bid interest seen just below 1.7680 while key support lies in the 1.7640-55 region and the loss of this area will further accelerate losses till distant strong support is seen around 1.7570. On the upside, immediate resistance as moved down to 1.7805 with mild offer lined up to 1.79 with a break above to lead to strong resistance around 1.7910. Any prospective gains are expected top capped below the 1.80 mark.

Key Resistance is seen at 1.7805 followed by 1.7910 while support starts at 1.7655 followed by 1.7570.

AUD/USD – Yesterday’s low was 0.7546 and high was 0.7585.
The pair closed at 0.7567.

The Australian Dollaris locked between conflicting fundamental factors and has immediate bottom picking bid interest just below 0.75 followed by strong support in the 0.7470-85 region. A clear break below this region is likely to accelerate losses towards the key support levels at 0.7420 followed by the crucial 0.7380 mark which has held well for the past year. On the upside, immediate resistance has moved down to 0.7605 with any move above to face selling orders lined up to 0.77 where resistance is very strong.

Key Resistance is seen at 0.7605 followed by 0.7655 while support starts at 0.7475 followed by 0.7420.

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