Australian FOREX Weekly Outlook 31/08/2005

31/08/05 (05:00 GMT)

• Dollar was boosted by better than expected data as Consumer confidence inched higher in spite of record high oil prices as the robust employment sector is making up for the price increases. More consumers were optimistic about job prospects for the first time since October 2001 while Durable Goods orders declined less than expected but are expected to bounce back. Meanwhile Oil hit a new record high as companies’ asses the damage of Hurricane Katrina with deep rooted losses expected for the economy in general. The Fed’s meeting minutes revealed their concern of inflationary pressures and further rate hikes were needed, they also raised their growth forecasts for this year. The focus shifts to today’s heavy data calendar with the Dollar expected to hold firm.

• Euro has eased back on Dollar strength but has found decent bottom picking support and is hovering around 1.22 with focus on today’s heavy data calendar which continues till the rest of the week. The employment sector in Germany and France has improved in the last few months but this recovery is seriously threatened by high oil prices and data releases today should confirm that the unemployment rate would stay around the record high levels. Earlier Italian consumer inflation came in less than expected in spite of oil prices spiking as producers are well aware of the realities of the beleaguered consumers are skeptical to pass on any costs in the current environment.
  
  

• Yen already under pressure from yesterday’s poor data releases in the form of weak household spending, retail trade and employment, got another jolt this morning on a much weaker than expected outcome in the industrial production data. The decline has come about more from the cut back in export orders as high oil prices have curbed the spending habits of the consumer with global demand for durable goods slowing. These results increase the dependence on domestic demand to keep the economy on the recovery track, meanwhile political campaign for elections on the 11^th are in full swing.
  

• Pound has declined further with the dollar’s general rally, as well as more evidence that the U.K. economy isn’t exactly going to brush aside the sluggish conditions currently plaguing it any time soon, is keeping it under selling pressure. In spite of signs of stabilization, housing market is definitely heading down with mortgage lending in the U.K. slipping to a 3 year low while consumer credit declined as well. Unlike the Euro-zone and Japan, domestic demand in the U.K. is currently more stiffened and exports which were just starting to pick are now going to be affected due to high oil prices pressuring global demand.
  

• Australian Dollar remains under pressure with lack of any factors to push it higher but still reasonably better fundamentals than the rest is offering decent support for now. This morning’s Current Account data has shown a reduction in deficit thanks to the healthy demand for Aussie commodity exports but this is threatened by slowing global demand due to high oil costs. Meanwhile in another clear sign of the economy slowing, building approvals fell to its lowest level in 3 years.

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FOREX Related Key Price Levels

EUR/USD – Yesterday’s low was 1.2171 and high was 1.2234.
The pair closed at 1.2215.

The pair continues to edge lower but decent bottom picking bid interest exists on its break below 1.21 with strong support existing in the 1.2155-70 support zone. A break below has the potential to accelerate its losses before bid interest is expected to come up around 1.21 but still on those levels hopes of a renewed fresh uptrend would fade. On the upside, immediate resistance has moved up to 1.2280 with selling interest on a break above 1.23 followed by very strong resistance around 1.2355. As long as the Euro stays below this mark it faces further losses with a wealth of data outcomes from both sides to direct the movements.

Key resistance is seen at 1.2280 followed by 1.2355 while support starts at 1.2155 followed by 1.2090.

USD/JPY – Yesterday’s low was 110.47 and high was 111.59.
The pair closed at 111.43.

The pair has finally broken its recent range and the Yen remains under pressure with immediate resistance now having moved up to the 111.90-112.05 zone where decent selling interest also exists. In case of a break above this region the Yen would shift in deep negative territory and losses could accelerate for it. On the downside, mild support is derived around 110.55 with mixed technical interest and no clear bias down to 109.70-85 zone where very strong bid interest exists. Japanese data has come in weak and a good result from the U.S. will lead to further gains for the pair other wide range bound trading is in order.

Key Resistance is seen at 111.90 followed by 112.25 while support starts at 110.55 followed by 109.70.

GBP/USD – Yesterday’s low was 1.7820 and high was 1.7965.
The pair closed at 1.7847.

The pair remains vulnerable for further losses but has gone towards the lower end of its monthly range with decent bottom picking bid interest persisting around 1.78 mark. A clear break below brings very strong support in the 1.7740-55 zone which is expected to hold but incase of a move lower the Pound would find it very hard to reverse its losses. On the upside immediate resistance has moved down to 1.7925 with a break above bringing into focus very strong resistance around the 1.80 mark which holds very strong resistance and is expected to cap any gains. The longer the pair remains below this mark the greater losses are likely. Data from both sides of the Atlantic is eyed today.

Key Resistance is seen at 1.7925 followed by 1.8005 while support starts at 1.7795 followed by 1.7745.

AUD/USD – Yesterday’s low was 0.7464 and high was 0.7514.
The pair closed at 0.7464.

The Australian Dollar remains vulnerable for further losses with key support levels broken and next support region lies around 0.7425-40. Decent bottom picking bid interest lies around 0.74 but a clear break below this region would shift the Aussie in negative territory and make it hard for it to reverse its losses and would send it to its lowest levels in 9 months. On the upside mild resistance has now moved down to 0.7555 pivot mark while any break above could lead to moves towards very strong resistance mark of 0.7610 with strong selling orders around it. A fresh uptrend for the Aussie is highly unlikely but cue is taken from other majors

Key Resistance is seen at 0.7555 followed by 0.7610 while support starts at 0.7435 followed by 0.7395.

Kunal Sharma

Forex Analyst

Easy Forex Pty Ltd. (Australia)
E-mail: kunal@easy-forex.com

Australian Financial Services License 246566

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