Australian FOREX Daily Outlook 06/07/2005

06/07/05 (03:00 GMT)

• Dollar remains well bid with positive sentiment behind it but its gains stabilized on mild profit taking as its recent rally has seen it increasing too much in too quick a time period. Also with the G8 summit starting today, the usual speculation of an announcement concerning Yuan revaluation stalled Dollars’ gains. Nature played its part as well with tropical storms around the U.S. coast adding to the supply concerns thus pushing Oil prices back above $60. Factory orders came in line with expectations but it was largely due to a pickup in aircraft orders.

• Euro found some support not only due to a few mild factors affecting the Dollar mentioned above but also due to another bout of positive data results. Retail Sales rose due to seasonal factors with summer usually leading to an increase in consumer spending while a weaker Euro is helping boost exports. German retail sales were even more robust making another strong case for the ECB to keep rates on hold in tomorrow’s meeting. The ECB got some support for its on hold policy from IMF’s Rato stating that there is no reason for interest rates to be cut in the present scenario. For now decent support lies around 1.1850 with a decisive break below likely to accelerate losses.

• Yen remained under pressure and broke above the 112 mark but the resistance zone at 111.90-112.10 continues to hold well for now, and it has stabilized around 111.60. Support was derived from the G8 summit starting today even though no currency issue is expected to be discussed. The Yen is in deep oversold territory for the short term but it has failed to gain due to Oil prices inching back above $60. It needs solid data results more than other currencies as the interest rate comparison makes it appear in a very poor light compared to other high yielders.

• Pound slipped by another 100 points before finding decent support around 1.75 and has stabilized above 1.7550 for now. It remains on the back foot ahead of BoE’s interest rate decision tomorrow where slight risk of a rate cut persists. Recent data has been mixed with a few positive aspects but it could be enough for majority of the members to maintain the on hold policy. However the Confederation of British Industry (CBI) is urging interest rates to be cut in the current environment which faces little risk of inflation and sluggish economic conditions.

• Australian Dollar slipped sharply by 100 points before stabilizing around 0.74, big funds took their profits finally breaking the Aussie’s stubborn resilience with the sharp fall in commodity prices weighing heavily against it. This morning the RBA as expected kept rates on hold as they had no other choice in the current economic environment which continues to project mixed signals.

EUR/USD – Yesterday’s low was 1.1867 and high was 1.1937.
The pair closed at 1.1923.

The pair has finally broken decisive support levels with further losses likely. Immediate support is seen in the 1.1850-75 zone which is crucial and a decisive break below likely 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 strong around 1.2045 with any foray above that mark likely to shift intra day sentiment in the Euro’s favour.

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 111.44 and high was 112.11.
The pair closed at 111.67.

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 has moved up to 111.20 with decent buying interest having moved up to any break below 110.70. Oil price direction is eyed for intra day movements.

Key Resistance is seen at 112.25 followed by 112.75 while support starts at 111.25 followed by 110.55.

GBP/USD – Yesterday’s low was 1.7503 and high was 1.7678.
The pair closed at 1.7574.

The Pound continued to slip sharply and losses continue unabated with many key support levels broken below. Sentiment should remain in deep negative territory till the BoE interest rate decision tomorrow. A relief rally could eventuate if they remain on hold as the Pound remains in oversold territory. Mild support is seen around 1.7640 with a break below likely to lead to moves above 1.77 which should resume selling interest. On the downside decent resistance lies in the 1.7490-1.7510 zone which is holding well for now. A decisive break below could further accelerate its losses.

Key Resistance is seen at 1.7640 followed by 1.7715 while support starts at 1.7495 followed by 1.7420.

AUD/USD – Yesterday’s low was 0.7390 and high was 0.7503.
The pair closed at 0.7429.

The Australian Dollar has taken cue from the sharp fall in commodity prices and has broken below key support levels with 0.75 giving way yesterday. 0.74 level has held well so far with decent buying interest around that mark. A decisive break below that mark could accelerate losses with distant support around 0.7325. On the upside resistance has moved down to the 0.7490-0.7510 zone with any moves towards 0.7555 to lead to strong selling interest.

Key Resistance is seen at 0.7505 followed by 0.7555 while support starts at 0.7395. followed by 0.7325.

Kunal Sharma
Forex Analyst

Easy Forex Pty Ltd. (Australia)

E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

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