Australian FOREX Daily Outlook 22/06/2005

22/06/05 (02:00 GMT)

• Dollar pared back its gains from the day before in the absence of any U.S. data with rumours of an imminent Yuan revaluation as well as dismissal of any ECB rate cut by the market also weighed in against the Greenback. Meanwhile, Oil prices have eased back slightly but continue their relentless pursuit of the $60 pb mark as various uncertain factors in regards to supply concerns is keeping prices supported.
  

• Euro experienced volatile moves after a rate cut by the Swedish National Bank, the 50 bps cut caught the market off guard and led to fears that this might be followed by the ECB and the Euro slipped below 1.21. However, with ECB President Trichet’s continuous dismissal of any rate cuts still fresh in the market’s mind and the realization that the zone might not warrant a rate cut in the short term as their deflationary conditions are mild compared to Sweden helped the Euro pare back its losses. Data from the zone was mixed as German ZEW Economic Sentiment survey came in higher than expected thanks to increase in export demand due to a weaker Euro however current situation component continues to be on the weak side. French Consumer spending declined more than estimated as confidence for the economy fails to pick up.

• Yen rallied largely due to speculation of Yuan revaluation in the near term which was led by the confirmation that Chinese President Jintao would be attending the G8 summit next month while Greenspan and Snow are going to testify the effect of fixed Yuan peg to the U.S. economy to the Senate Finance Panel. Both are expected to be very critical and add more pressure on China to move quickly. Thus the Yen went back towards 108.15 mark which was the second support line for the Dollar but weighing in on the Yen are oil prices staying at such high levels and this mornings Trade Balance shrinking more than expected due to sharp fall in exports.

• Pound made a sharp move higher and went towards the end of its recent range around 1.83 which as of now remains a sell region. The reasons for its rally included a statement by Blair that U.K.’s EU rebate is “an anomaly that has to go”. Of course he is waiting for the French to respond with a change in the farm subsidies but an agreement looks more on the cards now. Also helping it was its undisputed high yield advantage within Europe and while other nations are bordering towards a cut, the U.K. is more likely to stay on hold at its current 4.75% with today’s release of BoE’s meeting minutes eyed with keen interest.
  

• Australian Dollar breached another crucial barrier by breaking above 0.78 due to the Yuan revaluation issue coming back to the fore, commodity prices remaining firm as well as its higher yield and relative better fundamentals continue to make it seem as an attractive alternative. It has slipped back towards 0.7775 taking cue from the general direction on the majors but these factors are providing solid support above 0.77 for now.

EUR/USD – Yesterday’s low was 1.2069 and high was 1.2206.
The pair closed at 1.2186.

Dismissal of rate cut talks abound in the market led to Euro inching back towards 1.22 but it has decent sized selling orders in the 1.2215-45 with resistance around 1.2245. A break above will bring into focus the 1.23 region with very strong resistance and selling interest around 1.23. On the downside mild support is seen around 1.21 followed by the strong support zone of 1.2045-60. The 1.2110-1.22 region holds mixed technical interest but a decisive break below 1.2040 could accelerate the Euro’s losses.

Key resistance is seen at 1.2225 followed by 1.2315 while support starts at 1.2110 followed by 1.2045.

USD/JPY – Yesterday’s low was 108.14 and high was 109.47.
The pair closed at 108.48.

Yuan issue was back in the headlines helping the Yen break below mild support around 108.75 but so far the second support zone at 108.10-25 is holding well. The Dollar has decent buying interest on any foray below 108 with strong support around 107.75. On the upside 108.50-109.20 has mixed technical interest with mild resistance around 109.25 followed by very strong resistance around 109.75. A decisive break above 109.75 could accelerate the Yen’s losses.

Key Resistance is seen at 109.25 followed by 109.75 while support starts at 108.15 followed by 107.75.

GBP/USD – Yesterday’s low was 1.8165 and high was 1.8298.
The pair closed at 1.8287.

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 the main focus for today are the minutes of the Bank of England’s meeting.

Key Resistance is seen at 1.8315 followed by 1.8375 while support starts at 1.8225 followed by 1.8155.

AUD/USD – Yesterday’s low was 0.7724 and high was 0.7707.
The pair closed at 0.7789.

Commodity prices continue to rally higher thus helping the Australian Dollar break the crucial mark of 0.78. Uncertainty around other currencies has moved the first line of support up for the Aussie around 0.77.25 followed by strong buying interest around 0.7675. 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. Absence of any data from both sides should keep the pair moving within the 0.77 region.

Key Resistance is seen at 0.7815 followed by 0.7845 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