FOREX Trading Australia Daily Outlook 13/05/2005

13/05/05 (02:00 GMT)

FOREX Trading Australia – Market Summary

· Dollar tsunami intensified sweeping all majors with it and opening way for further gains. The past week has shown Twin deficits declining, Payrolls and yesterday’s Retail Sales coming in much higher than expected while the U.S.’s yield advantage is increasing, this coupled with weak data from other regions is making the market’s choice easy to back the Greenback. This also sets up the likelihood of a strong Q2 GDP outcome with focus on next week’s Capital Inflow data.

· The Euro finally gave in to the immense pressure of Dollar bulls and the break below the strong support mark at 1.2755 led to a freefall before stabilizing above 1.2650. Bottom pickers in the Euro, hoping to send it back to its highs have failed to prop it higher and their subsequent liquidation is causing the Euro to slip faster going towards its lowest yearly level. Earlier, German GDP surprised to the upside but the Zone’s GDP couldn’t beat expectations due to declines in other nations.

· The Yen fell declined further as the continuous stream of strong U.S. data has overshadowed the possibility of Yuan revaluation in the near term. Machine Tool orders came in slightly better than expected while money supply remained steady. The market is mindful of the likelihood of rumours and subsequent denials from the Chinese side in terms of Yuan revaluation, thus for now the pair has mild offers around 107.

· The Pound has seen the biggest turnaround in sentiment as the barrage of strong U.S. data has coincided by weak data from the U.K. side as well as increasing speculation of rate cut as the next course of action for the BoE. The Manufacturing sector has replaced the Housing sector as the most worrying factor for the economy. For now, bottom pickers have kept it above 1.86 with data outcomes from both sides of the Atlantic eyed.

· The Aussie taking cue form other major succumbed to the Dollar onslaught and broke below 0.77 and for now is close to breaking below its strong 4 month base around 0.7640. Meanwhile the Kiwi Dollar has seen a greater fall as unlike the Aussie, fundamentals are looking much weaker. Finance Minister Cullen has stated that the economy is heading for a slowdown as the Kiwi has fallen by over 200 pips in the past few days.

· Gold prices have slipped down to a 3 month low and are eyeing the strong support mark around 420. Dollar’s momentum has led to broad liquidation on Gold longs but good physical demand is lending some degree of support to it. A decisive break below 420 could lead to the acceleration of losses for the precious commodity.

Economic Data Released

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

Technical Analysis

EUR/USD – Yesterday’s low was 1.2665 and high was 1.2806.
The pair closed at 1.2679.

The Dollar juggernaut continues and in the current environment the decisive loss of the 1.2655 support mark, makes it hard to find near term support given the intense turnaround in sentiment. Dips below 1.26 might find some bottom pickers and profit taking could ensure it losses are limited. On the upside barring the Yuan story, the Euro has no factors behind it to help it inch higher with strong resistance above 1.2750.

Key resistance is seen at 1.2745 followed by 1.2825 while support starts at 1.2655 followed by 1.2575.

USD/JPY – Yesterday’s low was 105.69 and high was 106.91.
The pair closed at 106.75.

The lack of any concrete news on the Yuan revaluation front has led the Dollar to break above strong offers. The Yen’s decline was lesser compared to the other majors due to the possibility of an announcement in regards to Yuan revaluation, thus mild offers lie around 107 for now. Further up 107.55 holds resistance while on the downside Dollar bids lie around 106 and very strong support at 105.55.

Key Resistance is seen at 106.95 followed by 107.55 while support starts at 106.05 followed by 105.45.

GBP/USD – Yesterday’s low was 1.8601 and high was 1.8734.
The pair closed at 1.8626.

The combination of strong U.S. and weak U.K. data has sent the Pound crashing with prospect of rate cuts weighing in on it. Bottom pickers are keeping it above 1.86 wit a break below bringing into focus the strong support zone of 1.8555. Dollar momentum is eyed for further movements while on the upside 1.8695 holds resistance with 1.8725-40 the strong offered zone.

Key Resistance is seen at 1.8725 followed by 1.8780 while support starts at 1.8605 followed by 1.8555.

AUD/USD – Yesterday’s low was 0.7643 and high was 0.7738.
The pair closed at 0.7664.

The Employment data had a positive effect on the Aussie but the stronger U.S. data has led the Aussie break below its recent strong base around 0.77 and for now has stabilized around the second line of support around 0.7645. It risks further losses with support seen around 0.7595 while on the upside 0.7710 now becomes a resistance mark with strong offers on any foray above 0.7755.

Key Resistance is seen at 0.7715 followed by 0.7755 while support starts at 0.7605. followed by 0.7555.

Kunal ‘Kris’ Sharma
Forex Analyst
E-mail: kris@easy-forex.com

Australian Financial Services License 246566

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