Australian FOREX Daily Outlook 08/07/2005

08/07/05 (06:00 GMT)

• Dollar managed to recover after its initial plunge following the shock terror strikes in the heart of London. After a few details were confirmed and market had some time to digest the news, Dollar selling was quickly replaced by losses in the Pound. Nonetheless, this has ramifications for the Greenback as well but for now any negatives are being offset by the prospect of a strong Payrolls outcome (12:30 GMT). The forecasted figure of 200 K faces a few downside risks as suggested by the ISM Manufacturing employment index as well as corporate layoff figures.

• Euro benefited initially as a safe haven alternative compared to the Dollar and the Pound and managed to rally towards 1.2040. However, this was short lived and it slipped back towards 1.19 after reports came in of the perpetrators of the attack and that they have threatened Italy and Denmark as well. Thus the Swiss Franc assumed the mantle of sole safe haven currency and experienced volatile moves. Meanwhile, the ECB maintained its on hold stance and in spite of wide spread calls for a cut; President Trichet remained steadfast dismissing any changes in the current environment.

• Yen rallied towards 111.50 benefiting from its geographical isolation from the threats affecting other parts of the world, it was also supported by Oil prices slipping back as well as Japanese Machine tool orders coming in higher than expected. However, it quickly pared back its gains as the market shifted its focus back to fundamentals with Oil prices rising back while this afternoon’s data has come on the weak side. Household spending remained continued to decline while machine orders fell sharply. It has broken above the resistance around 112.20 with U.S. data and oil price movements eyed for further direction.

• Pound has stabilized around 1.74 for now as the market seems to have shrugged aside yesterday’s events and is looking ahead to the U.S. payrolls number. Earlier, House price data suggested that the sector has stabilized for now, but overall trend risks remains on the downside. Bank of England dispelled any added speculation of an increase in the likelihood of a rate cut after the blasts and kept rates unchanged at 4.75%. The minutes of the meeting are eyed to gauge the chances of a cut in the following meetings.

• Australian Dollar had a brief rally towards the 0.7450 after the events in London with its geographic isolation, stable political environment and robust Employment data making it an attractive alternative. However, commodity prices continue to tumble and the general Dollar rebound has led to the Aussie paring back its gains. Its losses continue as the support around 0.74 has broken with mild support around 0.7355.

EUR/USD – Yesterday’s low was 1.1908 and high was 1.2039.
The pair closed at 1.1934.

The pair like other majors saw volatile moves but sanity has returned to the market, 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 1.2055 with any foray above that mark likely to shift intra day sentiment in the Euro’s favour. U.S. payrolls data is eyed for further direction.

Key resistance is seen at 1.1975 followed by 1.2055 while support starts at 1.1850 followed by 1.1710.

USD/JPY – Yesterday’s low was 111.47 and high was 112.31.
The pair closed at 112.14.

Yen has bowed down to the general rally by the Greenback and remains on the backfoot, with the pair again breaking above the resistance around 112.20. It is vulnerable for further losses with next resistance around 112.75 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 1.7400 and high was 1.7539.
The pair closed at 1.7523.

The Pound has stabilized around 1.74 for now as the market seems to have digested yesterday’s events. Sentiment remains in deep negative territory with Mild support is seen around 1.7385 followed by support in the 1.7310-25 region. On the upside resistance lies around 1.7490 with a break above focusing on the resistance mark at 1.7575. Any break above that mark should lead to selling interest but a decisive break above 1.76 could shift intra day sentiment in its favours. U.S. payrolls data is eyed for further direction.

Key Resistance is seen at 1.7490 followed by 1.7575 while support starts at 1.7375 followed by 1.7310.

AUD/USD – Yesterday’s low was 0.7364 and high was 0.7464.
The pair closed at 0.7400.

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 0.7355 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 0.7455 followed by 0.7495 while support starts at 0.7345. 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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