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Trading Forex Online with Easy Forex 5/09/05 FOREX – Australian Dollar Market Comment Most majors have finally broken through their summer thin trading ranges but it took the costliest natural disaster to have ever hit the US to bring about some decisive movements. The repercussions of this natural, and given the shabby relief efforts could also be described as a man made disaster, will be felt in all key areas of the economy. The sorry state of affairs witnessed in disbelief by the entire world has added to negative sentiment around the Dollar with current estimates of damage having gone up to $100 billion and still counting. The Dollar’s biggest trump card the yield advantage heading its way is seriously threatened now with many betting on the Fed staying put in this month’s meeting and the previously taken for granted rate of 4% at the end of the year is now in doubt. Oil prices continue to sky rocket having broken above $70 pb and the worse seems far from over and sadly we might be at the beginning of a fresh uptrend with prices having the potential to go towards a mammoth $100 pb that will make current prices look like a good deal. The unrelenting demand, refinery problems and geo political problems have been the catalyst for the spike in prices since start of the year and oil experts have been arguing of $100 pb price even before the hurricane struck and now it seems like a distinct unfortunate reality. It could very well be the case of survival of the fittest and most resilient to these oil price shocks and on the face of it, it does appear that U.S. would be hit the hardest but that may not necessarily be the case. Lest start with the high performing but volatile economies of Asia, a good case study here is the Indonesian rupiah which has gone to its lowest level against the Greenback in four years as so far it is unable to deal with high oil prices. This has happened in spite of economy being on a reasonably strong footing but lack of clear and responsive protocols to deal with such shocks and given the great wealth divide within different sections of society as seen in all Asian countries is making it difficult to appropriately pass on cost to consumers. This is true for most Asian nations and unlike the U.S. they don’t have a good track record of coming out unscratched from such events. Thus it is foolish to assume high oil prices and even the Hurricane Katrina are solely a U.S. problem while in reality it is a huge global conundrum. American growth forecasts have been lowered as a result, with the American consumer surely to curb its spending habits. Now it’s not just the U.S. that depends on its consumers but all other major economies of the world with the biggest threat to China. American consumers have rattled record level of debts to buy less expensive Chinese products but now their purchasing power could reduce. In spite of its recent impressive effort to reduce its dependence on exports and spur internal growth, exports still account for a sizeable chink of the GDP. Also lets not forget in spite of its tremendous progress and impending super power status, as of now China is still considered a third world nation. And the reason is very simple, lack of transparency and sophisticated economic systems in place which would make it extra hard to deal with any economic meltdown. The commodity bloc along with the Pound is garnering support on its high yield but domestic demand is definitely slowing in these nations and expect a string of poor local data releases soon due to soaring oil prices and low global demand for products. This weakness should be witnessed in the Euro-zone’s data reflecting performance in August which is when Euro started appreciating again and oil prices started soaring. Any moves towards 1.30 in the current environment will have long term negative ramifications for the Zone. The Yen is likely to pare back its recent losses on the crosses and could break key technical barriers against the Dollar as the latest polls show Prime Minister Koizumi is set to be reelected with an increased majority and interest for Japanese equities is growing by the day. The risks of course emanate from the heavy trade correlation of US-Japan-China and significant weakness in one section of the chain could set a transcending effect of economic slowness in all.
FOREX RelatedKey Economic Releases
FOREX (Foreign Exchange) TechnicalScenario
EUR/USD – The pair is buoyed after decisively breaking above 1.25 which sets the trend for a further up move but has immediate resistance in the 1.2610-25 zone with mild selling interest on its break above 1.26. A clearer break higher brings distant resistance around 1.2730 but due to recent gains might have too fast and a pullback is likely. Decent sized offers are littered in the 1.26 region which intensify above 1.2670. A clear break above 1.2730 raises hopes of a fresh uptrend towards 1.30 with lack of U.S. data this week would lead to direction driven by European data. On the downside, immediate support comes up around 1.2440 with mild bid interest on dips below 1.25. A decisive break below the support mark could accelerate losses before strong support exists around 1.2355. Mixed interest lies down till 1.2250 with only a break below to shift the sentiment back in the Dollar’s favour.
Forex Analyst Easy Forex Pty Ltd. (
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