FOREX Trading Australia Daily Outlook 18/05/2005

18/05/05 (01:00 GMT)

FOREX Trading Australia – Market Summary

· Dollar remained firm as the higher than expected PPI opens the way for a firm CPI outcome released today (12:30 GMT), thus keeping the market excited. This has offset any negative ramifications for the Greenback after a poor Capital inflow data and the decline in Industrial Production. The Dollar was helped by the Treasury Department’s report which although criticized China, did not name them as currency manipulators as was expected by a few sections in the market

· The Euro remained largely unchanged and continued to hover around the 1.26 mark with no key data released from the zone. Meanwhile the latest opinion polls for the French referendum on the EU constitution to be held on May 29^th have seen the ‘no’ camp go back in the lead. Bottom pickers have helped the Euro stabilize with focus on U.S. CPI data with first resistance zone at 1.2690-1.2710.

· The Yen slipped after the initial euphoria of much higher than expected GDP reading however the report had its inherent weaknesses with the GDP deflator reading raising a few probing questions. In spite of the U.S. treasury not naming China as a manipulator they have gone a step closer and given them 6 months before the next report to move on this issue. It is very likely China would have taken a concrete revaluation step before the end of this year with the market mindful of this, before selling the Yen on its current fundamental weakness.

· The Pound remained on the back foot as the inflation figures came in line with expectations with the headline inflation below the BoE’s target 2% mark. The market has been very proactive in terms of reflecting U.K. rate hike scenario onto the Pound. Its foray above 1.90 was on hopes of a rate hike and its subsequent 700 point fall seems to be the market pricing in a rate cut. Bottom pickers are keeping it above 1.83 with U.K. employment data eyed.

· The Aussie continues to hover around the 0.7440-55 support zone as the market was disappointed by slight increase in revised retail sales figures but wage growth came in line with expectations while Consumer Sentiment increased, fueled by the Government’s tax cuts in its recent budget. Technically it is sitting at a crucial stage with 0.75 the important mark with U.S. inflation data to drive the pair.

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 1.2588 and high was 1.2662.
The pair closed at 1.2591.

Bottom pickers and mild profit taking has for now, helped the Euro stay around 1.26 with U.S., TIC’s data disappointing. A fair number of bids are lined down to the crucial psychological level of 1.25 with 1.2575-90 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 – Yesterday’s low was 106.55 and high was 107.55.
The pair closed at 107.52

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, 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. U.S. inflation data is eyed.

Key Resistance is seen at 107.75 followed by 108.25 while support starts at 106.75 followed by 106.25.

GBP/USD – Yesterday’s low was 1.8318 and high was 1.8423.
The pair closed at 1.8310.

Losses continue unabated for this pair as U.S. PPI comes in strong with CPI eyed today. House prices continue to decline with bottom pickers keeping the Pound above 1.83 for now. U.K. employment data is eyed with first support mark at 1.8275 followed by decent support zone at 1.8225-40. On the upside, resistance comes around 1.8390-1.8410 with any foray above 1.8455 leading to strong offers.

Key Resistance is seen at 1.8395 followed by 1.8455 while support starts at 1.8275 followed by 1.8225.

AUD/USD – Yesterday’s low was 0.7539 and high was 0.7585.
The pair closed at 0.7540.

The pair targeted the strong support zone at 0.7540-55 but failed to break below but is close to breaking below. A break below 0.75 pivot mark could accelerate losses. On the upside, 0.7615 now holds resistance followed by strong offers around 0.7655. U.S. inflation data as well as trend of commodity prices is eyed.

Key Resistance is seen at 0.7615 followed by 0.7655 while support starts at 0.7525. followed by 0.7455.

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

Australian Financial Services License 246566

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