FOREX Trading Australia Daily Outlook 16/04/2005

16/05/05 (01:00 GMT)

FOREX Trading Australia – Market Summary

· Dollar continued to surge ahead as sentiment has reversed significantly in its favour, with fears of slow U.S. growth subsiding on the recent string of strong data while other nation’s fundamentals look much weaker in comparison. The drop in Consumer Sentiment index which came at its lowest in 2 years was shrugged aside by the market and rightly so, as the index was down on factors which have since abated with oil prices falling below $50 pb. The focus shifts to the Capital inflow data which should remain around comfortable levels.

· The Euro which had been supported in recent times solely on the basis of poor U.S. data has seen its long positions liquidated with disdain as the U.S. growth outlook looks rosy, leading the Euro to go towards a 7 month low. Earlier, poor data continued from the zone with French CPI coming in lower than expected while this week’s data from the zone is expected to remain on the weak side. Thus strong U.S. data and a decisive break below 1.25 would have a significant impact on the Euro

· The Yen has declined as much, due to the cooling off in the Yuan revaluation issue as on the broader rally by the Dollar. Chinese Central Bank Gov. Zhou has revealed that they do not plan to revalue the Yuan, as was widely expected this week when China starts to trade in eight new foreign currency pairs. More bearish news for the Yen as this morning’s Japanese Current Account surplus has unexpectedly shrunk to its lowest level in a year as import costs have risen while exports have stiffened.

· The Pound losses have been magnanimous as the sudden spurt of strong U.S. data has coincided with the opposite for the U.K. data. The final nail in the coffin came from dovish BoE inflation report with more chances of rates being on hold or cut rather than a hike. Its sharp fall also showed the extent of speculators long liquidation that were banking on another rate hike in the near future. The region from 1.8375-1.8455 has provided solid support on most occasions in the last year and is crucial to prevent further acceleration of losses.

· The Aussie has slipped back below 0.76 but unlike other majors it hasn’t gone towards its yearly lows yet. Commodity prices are slipping on Dollar’s strength while the Aussie is looking close to slipping below its yearly lows and strong support zone at 0.7540-55. Cue is taken from other majors while the Aussie’s losses could accelerate on a clean break below 0.75.

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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 – Friday’s low was 1.2610 and high was 1.2687.
The pair closed at 1.2625.

Bottom pickers and mild profit taking has for now, helped the Euro stay around 1.26 with U.S., TIC’s data eyed. A fair number of bids are lined down to the crucial psychological level of 1.25 with 1.2575-90 support zone the first zone of support. On the upside no clear rally is expected from the Euro, with weak moves towards 1.2695-1.2710 likely to meet strong offers with strong resistance above it around 1.2755. The 1.25 level is eyed closely and a break below would signal a major shift in sentiment.

Key resistance is seen at 1.2675 followed by 1.2755 while support starts at 1.2580 followed by 1.2505.

USD/JPY – Friday’s low was 106.66 and high was 107.41.
The pair closed at 107.23.

The lack of any concrete news on the Yuan revaluation front has led the Dollar to break above strong offers. While mild offers above 107 were also broken above, this brings the 107.75 resistance mark into focus. A break above could accelerate gains towards the resistance zone at 108.20-35 as data outcome is eyed from both regions.

Key Resistance is seen at 107.75 followed by 108.45 while support starts at 106.75 followed by 106.15.

GBP/USD – Friday’s low was 1.8482 and high was 1.8656.
The pair closed at 1.8509.

Loss of recent strong support zone of 1.8650-75 has accelerated losses and many support marks have been broken with the pair around 1.85. Very crucial support zone lies in the 1.8440-60 zone with a clear break below 1.84 likely to lead to the acceleration of losses. On the upside, oversold conditions may lead to it inching higher with strong resistance and offers around 1.8575-90 followed by decent selling interest on any move above 1.8655.

Key Resistance is seen at 1.8575 followed by 1.8650 while support starts at 1.8455 followed by 1.8375.

AUD/USD – Friday’s low was 0.7600 and high was 0.7667.
The pair closed at 0.7609.

Recent strong support around 0.7615 has given way and the pair looks like targeting strong bids in the 0.7545-60 zone which has held as a strong base for this year. On the upside, 0.7665 now holds resistance followed by strong offers around 0.7715. 0.75 is the pivot mark with a break below could lead to a significant shift in sentiment.

Key Resistance is seen at 0.7665 followed by 0.7715 while support starts at 0.7555. followed by 0.7505.

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

Australian Financial Services License 246566

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