Fx Trading Australia Market Weekly Outlook 21/03/2

Fx Market Weekly Outlook 21/03/2005

FX Trading Australia – Weekly FOREX Market Summary

Dollar managed to gain towards the end of last week as the market is happy to take profits on its recent shorts. With the U.S. Fed set to raise rates again by 25 bps on Tuesday the cyclical yield advantage heading the U.S.’s way might once again garner more attention over its structural deficiency courtesy of the deficits.

With all global markets closed on Friday for holiday, the Dollar is not expected to weaken significantly and might post a further rally on profit taking. This might fit in well with the market’s plan given that other currencies are at levels which might attract some intervention tone from their respective Central Banks.

High oil prices are causing concern across the globe having gone to a new record high. However in spite of the ever increasing demand from emerging economies, oil prices should ease back as the winter in Northern Hemisphere abates and OPEC is confident of meeting demand. The Yen could rally on its crosses if oil prices do ease back, especially against the Euro with any foray above 140 showing strong selling interest for the pair.

The Fed’s meeting on Tuesday is the main focus, with a rate hike priced in and expected by one and all, the market is focusing on the accompanying statement. But even that is not expected to spring a surprise as the Fed is likely to repeat its measured path comment. Above 3% the decision of hiking rates would depend more on data outcomes. Thus focus will also be on the Inflation data which should increase on spike in oil prices.

Commodities might ease a bit on profit taking ahead of the Holiday weekend and with the Aussie back at record long position it remains vulnerable to slipping back. Especially if it can’t break above 0.80, which has been the target of speculators of late and the main reason behind the build up in Aussie longs. The New Zealand Dollar continues to be around its 23 year high with the highest interest rate in the western world behind it. Potential dangers for it include the likely slowdown in the domestic economy leading to rate cuts probably around early next year and a sharp fall in commodity prices. Prices have jumped to a degree on a surge in demand from emerging markets in China, Indonesia and India. However, in some key sectors demand is definitely stabilizing and could even witness a temporary slowdown.

Economic Releases

USA – Key data starts from Tuesday with PPI which should stay steady but should decline excluding food and energy. The Fed is expected to raise interest rates by 25 bps to 2.75%. Wednesday has CPI which should increase as the rise in consumer confidence has enabled Producers to pass on the high prices to Consumers. Thursday has Durable Goods orders which should rebound on increase in manufacturing activity. All markets are closed on Good Friday Holiday.

Euro-Zone – Key data starts from Monday with Italian unemployment rate which should stay unchanged. Tuesday has French Consumer Spending expected to decline as domestic demand remains mixed. Wednesday has German IFO survey with Biz climate, expectations and current assessment index estimated to decline slightly. The zone’s Trade Balance is likely to show deficit on high oil import costs. Industrial new orders are expected to decline on weak export and domestic demand. Thursday has German CPI which should decline on drop in common item prices. Friday has French Wages for Q4 expected to show a decline.

Japan – Japanese markets are closed on Monday and key data starts from Tuesday with the release of Bank of Japan’s Monetary Policy meeting. Also on tap are the Convenience Store sales expected to increase. Wednesday has the Merchandise Trade Balance with surplus expected to increase. Thursday has Tertiary Industry index as well as All Industry Activity index with an increase expected in both as general conditions improve. Friday has the CPI data with an increase expected as oil prices have spiked.

U.K. – Key data starts from Tuesday with CPI which should rise as witnessed globally by the spike in oil prices while the Retail price index is expected to inch higher. Wednesday has the revised GDP for Q4 with expectations of an increase. The minutes of Bank of England’s meeting will be keenly eyed for any future rate hike clues. The CBI Industrial Trends survey is expected to inch higher on pick up in exports. Thursday has Mortgage approvals with expectation of another decline.

FOREX Technical Scenario

EUR/USD – The Euro faces very strong resistance in the 1.3985-1.3510 zone which is laced with option barriers and offers. Speculators will be tempted to book profits on any foray above 1.35. With the pair breaking below late last Friday, good support exists on moves towards 1.3250 a break below brings the 1.3190-1.3220 support zone into focus. The pair could stay range between 1.33-1.3450.

USD/JPY – It continues to stay within the recent range with strong Dollar bids in the 103.50-75 zone continuing to hold firm. A decisive break below 103.50 could accelerate gains for the Yen with the next support mark at 102.90. On the upside the Dollar faces strong selling pressure on any foray above 105 with 105.45-60 acting as the stiff resistance zone.

GBP/USD – The Pound has found solid support and good buying interest on any dips down towards 1.91 with a break below bringing the 1.9040-55 support zone into focus. On the upside, technical interest is mixed up to 1.9270 where mild resistance exists with any foray above 1.93 attracting selling interest. A break above would lead to the strong resistance zone at 1.9345-60.

AUD/USD – The Aussie continues its pursuit of the 80 cent mark and it has remained above 0.78 for nearly three weeks now. Solid support continues in the 0.7845-60 zone with any move towards that region attracting strong buying interest, but a break could accelerate losses towards 0.7790 on liquidation of the record long positions. 0.7950-0.80 continues to be laced with strong option barriers with any move above 0.80 likely to ensue some profit taking.