Australian FOREX Daily Outlook 21/06/2005

21/06/05 (00:00 GMT)

• Dollar’s bid tone returned with vigor on the simple pretext of its fundamentals looking much more attractive in a short to mid term horizon compared to other currencies. The fact that last week’s growing deficits and funding shortfalls coupled with record high oil prices and larger than expected decline in the Leading indicators, didn’t have a lasting effect on the Greenback speaks volumes of the weak growth outlook in other regions. Meanwhile, Oil prices hit another record high as geo political factors affecting Nigeria and the Gulf coupled prospect of strike in Norway has helped in supporting prices at such high levels.

• Euro gave back its gains as quickly as it acquired it late on Friday as signs points towards the yield advantage of the Dollar to widen further. With the Fed all set to raise rates next week, the market was caught on the wrong foot after reports that ECB officials might consider cutting rates if data failed to pick up in the second half. And with economy across the zone unlikely to pick up significantly, a rate cut looks a much distinct possibility than it did up till last week when ECB officials kept dismissing any rate cut talks. Repercussions from the failed EU summit are also affecting the Euro with the focus on today’s ZEW Economic sentiment survey.

• Yen slipped back on the general Dollar rebound and much weaker than expected result in the Japanese convenience store sales. It dropped by around 100 points hovering around 109.50 with the slowdown in domestic spending having a bigger effect now that exports have declined due to sluggish conditions in other economies. Trade Balance is the next major focus and while surplus is expected to decline, a bigger decline could lead to another round of Yen selling.

• Pound slipped back taking cue from the Euro and has strong resistance above 1.8325 and decent sized offers around 1.8355. The lower than expected reading in the Rightmove House price survey set the tone of a weaker Pound throughout the day. But on a positive note money supply and lending data increased much more than estimations which should put some rate cut talk on the back bench for now. Minutes of BoE’s meeting are eyed to gain insight on their future stance

• Australian Dollar is caught between weakness in the Euro preventing it to break above 0.78 and strong commodity prices helping it stay above 0.77 for now. Lack of any significant breakouts on other majors should lead to narrow range bound movements. Earlier local Dwelling stats data declined more than expected led by a decline in private sector housing.

FOREX Related Economic Data Released

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

FOREX (Foreign Exchange) Technical Analysis

EUR/USD – Yesterday’s low was 1.2124 and high was 1.2238.
The pair closed at 1.2131.

Rate cut talk led to the Euro giving back all its gains acquired on Friday with strong resistance and selling interest on any foray above 1.23. Before that mild resistance exists in the 1.2220-35 zone. With sentiment back in the Dollar’s favour mild support is seen around 1.2110 with decent support in the 1.2040-55 zone. ZEW surveys are eyed for further direction.

Key resistance is seen at 1.2245 followed by 1.2325 while support starts at 1.2110 followed by 1.2045.

USD/JPY – Yesterday’s low was 108.60 and high was 109.59.
The pair closed at 109.42.

Weak data has sent the pair back into the 109 region with the 109.60-75 resistance zone holding well for now. A decisive break above could lead to acceleration of losses for the Yen with distant resistance around 111. On the3 downside support is mild around 108.75 with very strong support in the 108.25-40 for the Greenback. Oil prices and Japanese data is eyed for further direction.

Key Resistance is seen at 109.75 followed by 110.95 while support starts at 108.75 followed by 108.25.

GBP/USD – Yesterday’s low was 1.8204 and high was 1.8286.
The pair closed at 1.8207.

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. On the downside support lies around 1.8225 followed by strong buying interest in the 1.8155-70 zone. It has mixed technical interest in the 1.8225-1.83 zone with lack of any key data from both sides of the Atlantic should lead to directionless trading.

Key Resistance is seen at 1.8315 followed by 1.8355 while support starts at 1.8205 followed by 1.8145.

AUD/USD – Yesterday’s low was 0.7749 and high was 0.7790.
The pair closed at 0.7757.

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. It should move in narrow range bound movements within the 0.77 region.

Key Resistance is seen at 0.7785 followed by 0.7825 while support starts at 0.7725. followed by 0.7675.

Kunal Sharma
Forex Analyst

Easy Forex Pty Ltd. (Australia)

E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products