Australian FOREX Daily Outlook 17/06/2005

17/06/05 (06:00 GMT)

• Dollar eased back with a terrible result in the Philly Fed index preventing it from strengthening due to technical factors in its favour and the uncertainty around the Euro. This was the first negative reading for the index in two years and bodes ill for the National ISM survey with fears that the result might show the sector in contraction territory. Meanwhile, Oil price hit a two month high while demand is set to increase on the onset of American summer coupled with lack of enough refineries to process the excess supply of Crude oil; this could lead to major repercussions for global growth.
  

• Euro ended up around 1.21 yet again but not before it had some volatile spikes but any prospective gains from poor U.S. data was offset by disappointing tone emanating from the EU summit. After embarrassing rejections to the EU constitution, it was time for some soul searching for EU ministers. But unfortunately for the Euro, so far there are only agreeing to disagree with the U.K. remaining steadfast on not giving up its rebate. Earlier, inflation from the zone was tamer than expected while yearly figure was below the ECB’s target of 2%. Conditions are ripe for a rate cut but the ECB is not looking to move in that direction.
  

• Yen managed to break below 109 but for now has stabilized around that mark and is a bit directionless. The Leading Economic as well as Coincident index were revised up in data released today but the index is still in contraction territory. Yesterday Machine Toll orders came in higher than expected providing some relief as recent releases have been on the weak side. Japan is banking on pick up in global consumer demand but high oil prices are a serious deterrent towards the slow recovery of its economy.
  

• Pound like the Euro ended the day around 1.82 where it started as bulls failed to push it into the 1.83 region and eventually its own poor data results weighed in against it. Retail sales slowed to its lowest level in 6 years, sluggish conditions in nearly all sectors of the economy coupled with interest rates are taking its toll on the consumers. For now it has strong resistance and selling interest on any foray above 1.83.
  

• Australian Dollar did manage to clear past mild 0.77 but hasn’t cleared the 0.7755-70 strong resistance. Dollar, Yen and European currencies are plagued by poor data thus investing in the commodity bloc seems like the next best option. Fundamentals are also soft in the commodity bloc but the less attention paid to them compared to other majors has made it appear like a very attractive alternative. Gold prices have skyrocketed on these grounds but its rally could have been overextended in the short term.

*Only key potential market moving data is mentioned, for a detailed Economic Calendar please click on the ‘Financial Calendar’ link on the web-site.

EUR/USD – Yesterday’s low was 1.2056 and high was 1.2167.
The pair closed at 1.2105.

Weak U.S. data and technical factors against the Euro led to yet another patchy trading day as the Euro continues to hover around the 1.21 mark with mild support around 1.2045 followed by the crucial support zone at 1.990-1.2010. On the upside mild resistance exists around 1.2145 followed by very strong resistance and offers on any break above 1.22. A break below 1.20 could accelerate losses and push the pair into 1.18 region. EU summit news is eyed for further direction on the pair.

Key resistance is seen at 1.2145 followed by 1.2215 while support starts at 1.2055 followed by 1.1995.

USD/JPY –Yesterday’s low was 108.65 and high was 109.38.
The pair closed at 108.76.

109 region holds mixed technical interest for this pair as it remains locked within that region. The Yen risks losses if it can’t break decisively below 108.75 which holds mild support followed by very strong support around the 108.25 mark. On the upside mild resistance lies around 109.45 followed by very strong around 109.75 but a clear break above could accelerate losses for the Yen. Oil prices are eyed for Yen’s direction on its crosses.

Key Resistance is seen at 109.45 followed by 109.75 while support starts at 108.75 followed by 108.25.

GBP/USD – Yesterday’s low was 1.8166 and high was 1.8288.
The pair closed at 1.8202.

The pair rallied higher as it is prone to exaggeratory movements more than other majors but gains were halted around the second resistance zone of 1.8295-1.8310 after mild resistance around 1.8245 was breached easily. Selling orders are strong on any foray above 1.83 while downside mild support lie around 1.8175 followed by bottom picker keeping it above 1.81 with decent buying orders.

Key Resistance is seen at 1.8255 followed by 1.8315 while support starts at 1.8175 followed by 1.8095.

AUD/USD – Yesterday’s low was 0.7661 and high was 0.7742.
The apir closed at 0.7737.

Commodity prices have remained firm thus helping the Australian Dollar break above 0.77 with resistance strong in the 0.7755-70 zone. Uncertainty for other currencies has moved the first line of support up for the Aussie around 0.7665 followed by strong buying interest around 0.7615. If it stays below 0.77555 then slow range trading is the likely scenario for today.

Key Resistance is seen at 0.7755 followed by 0.7775 while support starts at 0.7665. followed by 0.7615.

Kunal Sharma
Forex Analyst

Easy Forex Pty Ltd. (Australia)

E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

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