Australian FOREX Daily Outlook 20/06/2005

20/06/05 (00:00 GMT)

• Dollar crashed after two records were set with Oil prices going to its highest level ever and the U.S. Current Account Deficit also hit a new high. These outcomes coupled with poor data and a below par TIC’s result earlier this week were too significant to be ignored by the market. Thus the technical factors in the Greenback’s favour and EU uncertainty were brushed aside and broad scale profit taking ensued. Consumer Confidence came in higher than expected which also played its part in pushing Oil up. Meanwhile the high Deficit is here to stay as demand for U.S. products and assets is reducing gradually with Euro-Zone and Japanese economy in sluggish conditions.

• Euro broke key technical barriers and its gains accelerated after it broke above 1.22 and closed just below 1.23. Its sharp rally had a feeling of déjà vu when it rallied last year on U.S. deficit concerns and also strengthened on all its crosses. Meanwhile just as feared, the EU summit has ended in failure as leaders failed to agree on the budget with France and the U.K. refusing to budge from their stand. Luxembourg’s Prime Minister Juncker in charge of EU presidency tried in vain to persuade both camps and in the end had no clear answers in regards to the future. Earlier, data outcome for a change came above forecasts with Industrial Production from the zone increasing due to higher cyclical consumer demand for durable goods.

• Yen’s movements were narrow compared to other majors against the Greenback as oil prices going to a new record high at $58.47 led to profit taking on its crosses and it fell by around 200 points against the Euro. Thus, it failed to break below mild support around 108.50 with strong support in the 108.10-25 zone. This is likely to cause headaches for Japanese officials hoping for a steady recovery in the economy in the second half of the year as their assertion is based on oil prices staying at least below $55.

• Pound managed to break 1.83 and closed above it but unlike the Euro it wasn’t as oversold in recent times and it slipped on its Euro cross on profit taking after going towards its 10 month high earlier this week, this stiffened its gains against the Greenback. The attention shifts to the BoE’s meeting minutes released mid week for future rate clues with data expected to stay on the soft side. 1.83 region has selling orders laced up to 1.84.
  

• Australian Dollar ended another week on a high against the Dollar going to its highest level in more than month as commodities continued their stunning rally. Copper prices jumped to a 16 year high and Gold managed to touch $440 while its high yield is acting as an icing on the cake. Recent strong production data from China suggests that their economy hasn’t cooled off and demand for Aussie commodities is expected to remain healthy. It broke above resistance at 0.7755 before stabilizing around 0.7780 with cue taken from other majors.

*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 – Friday’s low was 1.2090 and high was 1.2287.
The pair closed at 1.2282.

Lack of any Euro sellers left led to massive position taking on its shorts with weak U.S. data providing good momentum for the Euro to rally breaking key resistance barriers at 1.2175 and 1.2255. For now resistance exists around 1.2355 with decent sized selling orders above 1.23 before that. The 1.2395-1.2410 resistance zone is crucial to maintain the Dollar’s upper hand over the Euro with a decisive break above could signal the shift in sentiment. On the downside good support lies around 1.2175 with strong support around 1.2125. 1.22 region holds mixed technical interest.

Key resistance is seen at 1.2355 followed by 1.2405 while support starts at 1.2175 followed by 1.2125.

USD/JPY – Friday’s low was 108.50 and high was 109.07.
The pair closed at 108.55.

The pair managed to go back in the 108 region with mild support around 108.50 followed by strong support in the 108.10-25 zone with a break below bringing the 107.75 pivot mark into focus. It has mixed technical interest up to 109.15 which is first line of resistance followed by very strong resistance around the 109.75 mark. Oil prices and the general direction of the Greenback is eyed to drive this pair.

Key Resistance is seen at 109.15 followed by 109.75 while support starts at 108.25 followed by 107.75.

GBP/USD – Friday’s low was 1.8189 and high was 1.8307.
The pair closed at 1.8303.

The resistance zone at 1.8290-1.8310 capped its gains for now with mild resistance around 1.8355 followed by very strong resistance in the 1.8395-1.8410 zone. Decent sized selling orders are placed from 1.8355-1.8425 with a break above this could signify the shift in sentiment in the Pound’s favour. On the downside support lies around 1.8225 followed by strong buying interest in the 1.8155-70 zone.

Key Resistance is seen at 1.8345 followed by 1.8395 while support starts at 1.8225 followed by 1.8155.

AUD/USD – Friday’s low was 0.7713 and high was 0.7781.
The pair closed at 0.7777.

Commodity prices continue to rally higher thus helping the Australian Dollar break the strong resistance mark of 0.7755. Uncertainty around other currencies has moved the first line of support up for the Aussie around 0.77 followed by strong buying interest around 0.7655. Resistance is strong between 0.7800-0.7845 which is laced with decent sized selling orders but Commodity prices are watched for short term direction.

Key Resistance is seen at 0.7795 followed by 0.7845 while support starts at 0.7715. followed by 0.7655.

Kunal Sharma
Forex Analyst

Easy Forex Pty Ltd. (Australia)

E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

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