Australian FOREX Daily Oulook 29/09/2005

29/09/05 (04:00 GMT)

• Dollar pared back its intra day gains as Oil prices inched higher while natural gas prices reached yet another high for the year. Some refineries could remain shut for another few weeks as repair work gets underway while demand is expected to keep increasing as U.S. and Europe brace themselves for winter. Also Dollar’s inability to break key support against the Euro and the assertion that its recent rally against the Yen might have been too quick has led to regular bouts of profit taking. Earlier Durable Goods orders printed a robust number after previous period’s sharp drop while next period’s outcome could be lower due to the hurricane strength in this sector should persists. While it is easy to price in the certainty which is higher U.S. interest rates, the uncertainty of direction of oil &amp energy prices could stiffen the prospective gains for the Greenback.

• Euro continues to find decent bid interest just below 1.20 with good technical support, an improvement seen in the political situation as well steady data outcomes also helped in stabilizing the Euro. Schroeder and Merkel seem to have had constructive talks yesterday and while they could still form a grand coalition, disagreement should persist on exactly who should be the chancellor. Meanwhile the Euro’s decline continues to boost exports and translate to improved business confidence with Italy finally catching up. It is hoped that this recovery should soon lead to the pick up in the beleaguered employment sector throughout the zone which could help offset the decline in consumer confidence as oil prices are adding to concerns.

• Yen has stabilized on profit taking on its recent quick fall against the Dollar while this morning’s data outcome should also lend good support. Retail sales came in higher than expected and was the first increase in the last four months as finally the improvement seen in corporate profits and subsequently employment sector is now starting to translate to an improvement in the sluggish consumer spending sector. Tomorrow’s data is expected to add further optimism for the economy with improvement seen in industrial production as well as employment data while inflation is set to inch higher. Recent talk from BoJ officials and the expected improvement in the economy in months to come is likely to finally lead to a change in Japan’s monetary policy next year.

• Pound continued to be the favoured currency to dump as data disappointed yet again with annual GDP revised down to a 12 year low level. The growth outlook doesn’t look much promising either with the Government finally downgrading its forecast in line with the projections of other agencies. Also the CBI Retail sales survey recorded the worst reading since the last 22 years when this survey was started. Thus more signals for the BoE to cut interest rates soon but for now they are expected to stay on hold due to inflationary pressures and recent evidence of slight pick up in spending after the last rate cut.

• Australian Dollar has gone higher and for now hovers around 0.76 with commodity prices inching back up led by Gold which zoomed towards $ 470 with further gains anticipated by the end of the year. But the biggest mover was across the Tasman with the New Zealand Dollar rallying across the board after an unexpected rise in GDP. This surge was led by business investment as well as steady household spending and now raises a distinct possibility of an interest rate hike next month. But exports need to be maintained which is threatened when the Kiwi goes above 0.70.

FOREX Related Upcoming Economic Release

FOREX (Foreign Exchange)Key Intra-Day Pivot levels

EUR/USD – Yesterday’s low was 1.1992 and high was 1.2071.
The pair closed at 1.2056.

The pair continues to find strong bid interest just below 1.20 and support around 1.980 holding firm. Resistance is equally strong in the 1.2090-1.2110 region with a clear and decisive break above to shift the pair in neutral territory. Mixed interest with mild Dollar bias is seen up to the 1.2215 mark where resistance is very strong and gains are expected to be capped around it. On the downside a clear break below 1.20 has the potential to further accelerate losses towards the strong support mark of 1.1910 with decent bid interest down till 1.890. German political outcome and oil prices are eyed for intra day spikes.

Key resistance is seen at 1.2110 followed by 1.2215 while support starts at 1.1980 followed by 1.1910.

USD/JPY – Yesterday’s low was 112.85 and high was 113.43.

The pair closed at 112.97

The Yen has stabilized as recent gains might have been in too quick with immediate resistance continuing around 113.50 and profit taking offers lying above it. A break above brings into focus very strong resistance around 114 with offers increasing in strength above it. On the downside conflicting conditions is keeping direction a bit mixed with immediate support around 112.55 followed by strong bid interest just below 112 and good support around 111.90. Only a break into the 11 region will shift the pair back in neutral region otherwise the Yen remains under pressure but it’s outlook is good on the crosses.

Key Resistance is seen at 113.55 followed by 114.00 while support starts at 112.55 followed by 111.90.

GBP/USD – Yesterday’s low was 1.7604 and high was 1.7716.
The pair closed at 1.7681.

The pair continues to brake down with key support levels breached and looks vulnerable for further losses. It found god bid interest on a fall towards 1.76 but it is likely to be a case of minor profit taking rallies with selling interest intact. A break of support around 1.76 could further accelerate losses with the 1.7550-65 region expected to provide a fair degree of support. On the upside, immediate resistance has moved down to 1.7725 with mixed interest seen above it till very strong resistance lies around 1.78.

Key Resistance is seen at 1.7725 followed by 1.7810 while support starts at 1.7605 followed by 1.7550.

AUD/USD – Yesterday’s low was 0.7543 and high was 0.7606.
The pair closed at 0.7594.

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 0.7595 with any move above to face selling orders lined up to 0.77 where resistance is very strong.

Key Resistance is seen at 0.7595 followed by 0.7655 while support starts at 0.7475 followed by 0.7420.

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