Australian FOREX Daily Outlook 05/07/2005

05/07/05 (03:00 GMT)

• Dollar after zooming higher in early Asian trading on Monday stabilized and was confined to narrow movements for the rest of the day with holiday in the U.S. leading to thin trading. Sentiment remains in the Dollar’s favour with the U.S. the only industrialized nation to raise rates this year while its fundamentals continue to outperform. Meanwhile, Oil prices are close to breaking back above $60 as the summer driving season gets underway with demand increasing but supply remains steady.
  

• Euro dipped below 1.19 going towards its lowest level in more than a year but managed to stabilize and close above that mark. Political uncertainty plaguing the future of the EU returned with ECB member Noyer stating that it was possible for a country to leave the single currency bloc. Services PMI was released a day ahead of schedule and came in slightly below forecasts while PPI was much tamer than expectations. A decisive break below 1.1850 could accelerate its losses.
  

• Yen finally found some support with the resistance zone at 111.90-112.10 holding well for now. In spite of Dollar’s general rally, the assertion is that the Yen has declined much more than expected and remains in oversold territory, especially in an environment of prospect of China announcing a Yuan revaluation this year. Data was positive with worker’s average basic pay rising for only the second time 13 months while monetary base remained around steady levels.

• Pound found some respite earlier after a set of positive data releases dispelled some doubts of a rate cut in this week’s meeting. Construction activity jumped to a six month high while PMI Services also beat expectations. However the BRC Retail sales outcome showed a decline in spite of supporting seasonal factors. Consumer confidence remains low due to several factors and BoE can eliminate one of these by reducing rates to spur growth.

• Australian Dollar remained on the backfoot while sentiment continues to shift away from it as interest rates are the main driving theme at present. RBA should in all probability remain on hold in tomorrow’s meeting however the view that the next move is likely to be in the downward direction is growing. The previously robust employment sector is appearing a bit shaky while Trade deficit continues to widen. It has slipped below 0.75 with the market happy to sell on any minor rallies

EUR/USD – Yesterday’s low was 1.1888 and high was 1.1948.
The pair closed at 1.1909.

The pair has finally broken decisive support levels with further losses likely. Immediate support is seen in the 1.1850-75 zone with a decisive break below to accelerate losses with next distant support seen around 1.17. On the upside, sell on rallies remains as the market’s strategy with mild resistance around 1.1975 followed by selling interest on any foray above 1.20. Resistance is

Key resistance is seen at 1.1975 followed by 1.2045 while support starts at 1.1850 followed by 1.1710.

USD/JPY – Yesterday’s low was 111.31 and high was 111.72.
The pair closed at 111.63.

Yen has bowed down to the general rally by the Greenback and remains on the backfoot and is close to the pivot 111.95-112.20 resistance zone. A break above would lead the Yen to its lowest level in a year and lead to the 112.75 resistance mark with any move above likely to accelerate its losses. On the downside, mild support lies around 110.90 with decent buying interest having moved up to any break below 110.50.

Key Resistance is seen at 112.25 followed by 112.75 while support starts at 110.85 followed by 110.45.

GBP/USD – Yesterday’s low was 1.7569 and high was 1.7652.
The pair closed at 1.7613.

The Pound slipped sharply and losses continue unabated with many key support levels broken below. Sentiment should remain in deep negative territory till the BoE interest rate meeting. It is a bit oversold in short term and could move back above 1.77 with mild resistance around 1.1725. On the downside, 1.7575-90 is a crucial support zone with a decisive break below to send the Pound to its lowest level in a year which follows resistance around 1.7515.

Key Resistance is seen at 1.7675 followed by 1.7745 while support starts at 1.7575 followed by 1.7515.

AUD/USD – Yesterday’s low was 0.7476 and high was 0.7617.
The pair closed at 0.7491.

The Australian Dollar has taken cue from the sharp fall in commodity prices and has broken below key support levels but it continues to hover around the second support mark around 0.7480 has held well for now. A break below targets the pivot 0.7435-50 region which holds strong support and a decisive break below could accelerate losses for the Aussie. On the upside, mild resistance lies around 0.7575 followed by strong resistance in the 0.7625-40 zone.

Key Resistance is seen at 0.7575 followed by 0.7645 while support starts at 0.7485. followed by 0.7435.

Kunal Sharma
Forex Analyst

Easy Forex Pty Ltd. (Australia)

E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

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