Australian FOREX Daily Outlook 07/07/2005

07/07/05 (03:00 GMT)

• Dollar’s direction was a bit mixed after conflicting data results which saw ISM Services index rise more than expectations with the employment sub index showing a healthy increase. However, this was offset by sharp rise in corporate layoffs which was the highest result in 17 months. This makes tomorrow’s Payrolls result even more uncertain with the projected 200 K resulted plagued with downside risks. Also weighing in on the Dollar were Oil prices which went to another record high with tropical storms over the U.S. coast adding to the supply concerns.
  

• Euro managed to stay above 1.19 as the market is adopting a neutral stance ahead of tomorrow’s U.S. Payrolls report. Data remained positive with German factory orders coming in much higher than expected as not only is a weaker Euro boosting exports but domestic demand is increasing as well. In spite of heavy speculation and recent drama in regards to the fate of interest rates in the Zone, the ECB is all set to leave rates on hold today and recent data outcomes support their stand. The market would be all ears to any comments for their future monetary policy stance.

• Yen suffered more losses and has closed above the 112 mark with record high oil prices offsetting any positives emanating out of recent data results. Leading Economic & Coincident index improved but were in line with expectations with Machine orders data eyed for today. Dollar’s general direction should drive this pair with no factors to push the Yen higher while Oil prices are also eyed closely.

• Pound has slipped sharply this morning as many traders look to offload their positions ahead of BoE rate setting meeting today. Risk, be it a mild one, of a rate cut persists and more volatile moves likely. Earlier a better than expected outcome in the Industrial Production data helped the Pound push towards 1.76 but the damage has already been done in terms of slowing the economy with NIESR indicating that the economy grew at its slowest pace in 4 years and a rate cut is warranted.

• Australian Dollar experienced volatile moves this morning after the much better than expected Employment report sent it back above 0.74 but overall sentiment and technical factors are against it, which became a good selling opportunity sending it back below that mark. Unemployment rate slipped down to 5% which is a 29 year low while 41.7K jobs were added. This is a very positive outcome and could help the Aussie erase its past week’s losses if U.S. payrolls numbers are weak.

EUR/USD – Yesterday’s low was 1.1891 and high was 1.1951.
The pair closed at 1.1923.

The pair after breaking decisive support levels has stabilized for now. 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 1.1955 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 111.45 and high was 112.27.
The pair closed at 112.23.

Yen has bowed down to the general rally by the Greenback and remains on the backfoot, with the pair breaking above the resistance around 112 decisively. It is vulnerable for further losses with next resistance around 112.55 mark with any move above likely to accelerate its losses. On the downside, mild support has moved up to 111.50 with decent buying interest having moved up to any break below 111. Oil price direction is eyed for intra day movements.

Key Resistance is seen at 112.55 followed by 112.95 while support starts at 111.45 followed by 110.95.

GBP/USD – Yesterday’s low was 1.7506 and high was 1.7607.
The pair closed at 1.7533.

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 today. A relief rally could eventuate if they remain on hold as the Pound remains in oversold territory. Mild support is seen around 1.7590 with a break likely to lead to moves above 1.7650 which should resume selling interest. On the downside decent resistance lies in the 1.7460-75 zone which is holding well for now. A decisive break below could further accelerate its losses.

Key Resistance is seen at 1.7590 followed by 1.7645 while support starts at 1.7455 followed by 1.7390.

AUD/USD – Yesterday’s low was 0.7380 and high was 0.7443.
The pair closed at 0.7392.

The Australian Dollar has failed to benefit from a robust employment report and has slipped back into the 0.73 region. Mild support and decent buying interest lies around 0.7375 with a decisive break below to accelerate losses and bring into focus the strong support zone at 0.7310-25. On the upside, the market seems content on selling on rallies with mild resistance around 0.7445 with a break above to lead to the 0.7495-0.7510 strong resistance zone with offers above that region.

Key Resistance is seen at 0.7445 followed by 0.7495 while support starts at 0.7375. 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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