Australian FOREX Daily Outlook 13/07/2005

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13/07/05 (06:00 GMT)

• Dollar slipped further as old ghosts came back to haunt it, with the market abound with speculation of a record high trade deficit outcome. The reason behind this has been the high trade surplus outcome in China which gave another excuse for the market to take profits on dollar longs with a result above $60bn could lead to the dollar declining further. Also rumours of some central banks looking to diversify their dollar holdings into other currencies, notably the Euro put further pressure on the Greenback. Oil prices went back above $60pb as hurricanes continue to storm the US coast.
  

• Euro managed to break another key barrier this time around 1.22 but faces stronger resistance around 1.23. Earlier, French trade deficit declined unexpectedly giving further evidence that a significantly weaker Euro has substantially boosted exports. However the slight pick up in growth has only been seen in the zone’s two largest economies Germany & France but other nations continue to struggle. Today’s inflation data is eyed from the zone, which like the rest of the world should increase on high oil prices. Thus the prospect of the ECB reducing interest rates should decline further.
  

• Yen after breaking impressively below the 111 region has pared back some of its gains, as this mornings data has been below par. Trade surplus has shrunk due to the high import costs of oil as even the pick up in export prices wasn’t enough to prevent the decline. Also beleaguered manufacturing sector remained weak with industrial production falling more than expected as exports demand remains weak to average while domestic demand fails to pick up. Bank of Japan as expected has kept its ultra loose monetary policy intact. For now decent dollar bids remain intact below 110.75.
  

• Pound has made an impressive comeback in the last few days, as it was boosted by the slightly higher than expected inflation outcome. This would not be a reason for BoE to raise interest rates, but it does put a spanner in any rate cut plans for the short term. However economic conditions remain on the sluggish side with today’s employment data eyed keenly. Wages are expected to decline but US data is eyed to drive this pair decisively. In UK’s first speech in charge of the EU presidency important conflicting issues could not be discussed as the London attacks occupied a major part of the speech. For now immediate resistance is seen around 1.7780.
  

• Australian Dollar took cue from European currencies and further strengthening of commodity prices and is hovering around the 0.7550 mark. But any turn around by the Greenback could see the Aussie slip sharply as local fundamentals are weak, this mornings consumer sentiment survey has shown a larger than expected decline. While the Kiwi dollar slips sharply after shocking retail sales outcome, with the high interest rates taking a substantial toll on the consumers.

EUR/USD – Yesterday’s low was 1.2052 and high was 1.2255.
The pair closed at 1.2214.

The pair has broken key resistance around 1.22 but very strong resistance lies around 1.23 with decent offers lined between 1.2250-1.23. Offers become much stronger on any break above 1.2345 but a decisive break above 1.24 could make it hard for the dollar to make a comeback. Key driver for today’s movements is the US trade balance outcome, volatile moves are possible. On the downside mild support is seen around 1.2110-25 with a decisive break below likely to accelerate its losses towards 1.2040-55 support zone. Any moves into the 1.19 region would shift the momentum back in the dollars favour.

Key resistance is seen at 1.2325 followed by 1.2405 while support starts at 1.2110 followed by 1.1975

USD/JPY – Yesterday’s low was 110.74 and high was 111.78.
The pair closed at 111.06.

The Yen managed to break below the decisive level around 111 but dollar bids remain strong in the 110.50-75 support zone. Apart from the US data, oil price movements are eyed for intra-day direction. A break below the support zone could accelerate losses towards 109.90-110.10. Any deep forays into the 109 region would make it hard for the dollar to reverse its recent losses. On the upside immediate resistance is seen around 111.55-70 with the break below likely to lead to moves towards 112.30-45 strong resistance zone.

Key Resistance is seen at 111.75 followed by 112.45 while support starts at 110.55 followed by 109.90.

GBP/USD – Yesterday’s low was 1.7548 and high was 1.7787.
The pair closed at 1.7747.

The Pound has made an impressive recovery and managed to break some more key technical barriers and weekly sentiment seems to have come back in its favour. Immediate resistance is seen around 1.7815-30 resistance zone with decent selling interest on any break above the 1.78 mark. A break higher would lead to moves towards 1.79 where very strong resistance exists. Moves are directed by US data as well as the UK employment data. On the downside immediate support is seen in the 1.7640-55 support zone. Incase of a decisive break below this region the next line of support comes up in the 1.7560-75 support zone. The momentum could shift back into dollars favour if the pair breaks below 1.75.

Key Resistance is seen at 1.7830 followed by 1.7905 while support starts at 1.7560 followed by 1.7490.

AUD/USD – Yesterday’s low was 0.7466 and high was 0.7574.
The pair closed at 0.7549.

The Australian Dollar has taken cue from other majors and broken decisively above 0.75, immediate resistance is seen around 0.7575. A break above could lead to moves towards 0.7645 but strong offers lie above that mark. Any foray into the 0.77 region has mixed technical interest, while on the downside immediate support comes up around the 0.7485 mark. A decisive break below could lead to moves towards 0.7420-35 which holds decent buying interest. Any moves into the 0.73 region could shift the momentum back in the dollar’s favour.

Key Resistance is seen at 0.7615 followed by 0.7675 while support starts at 0.7485. followed by 0.7420.

Kunal Sharma
Forex Analyst

Easy Forex Pty Ltd. (Australia)
E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

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