Australian FOREX Daily Oulook 31/10/2005

MARKET SUMMARY – 31/10/05(03.30GMT)
                                                                     

• The Dollar rallied against the majors on Friday night, following stronger than expected US GDP data. Third quarter GDP rose 3.8 percent, above analysts forecasts for 3.6 percent growth. Analysts are suggesting that with a combination of solid data and what looks to be increasing price pressure, US yields will continue to rise and add support to the dollar. The GDP deflator, a gauge of inflation watched by the Fed, rose 3.1 percent, above economists'' forecasts for a rise of 2.8 percent. The third quarter U.S. employment cost index, a gauge of wage inflation, rose 0.8 percent, matching economist’s forecasts. The Chicago PMI report for October also will be released on Monday, with economists looking for the index to drop to 57.2 from 60.5 in September.  

• The Euro rose to 1.2170 in the early part of the London session with CTA’S purchasing Euro versus some crosses. However, these gains were cancelled out very quick with the strong data out of the States. The Euro fell from 1.2150 in the New York session to close near its lows at 1.2160. The EUR gained support near the low during the US trading hour, with strong buying on the EUR/GBP crosses. There are no major economic releases in the Eurozone today.

• The Japanese yen also weakened again the dollar on the strong economic data out of the states. The Japanese yen rose from JPY115.30 to close the New York session near its highs of JPY 115.70. Economic data which came out on Friday was mixed, with the overall jobless rate in September edging down from 4.3% to 4.2%, suggesting that future domestic demand may continue to look good. On the other hand, household spending numbers were weaker than expected as was September industrial production (0.2% against 2.0% consensus. There are no major economic releases in the Eurozone today.

• The Pound finished lower at US$1.7732 on the back of strong economic data from US and strong EUR/GBP buying during the NY session. These twin factors accelerated the Sterling’s fall for the day. There are no major economic releases in the UK today.

• The Aussie dollar was under pressure throughout both the London & New York session moving down from 0.7560 to 0.7530.   Some of the selling came from risk aversion trades, with AUD/CHF selling of note in the session. Aussie also suffered under a cloud of falling metal prices and then strong US data took it down to its lows of 0.7490. There are no major economic releases in the Australia today. 

TECHNICAL COMMENTARY

• Euro – 1.2060

After taking out resistance at 1.2149 (38.2% of 1.2590 to 1.1877), the rally ran out of steam as it approached the 1.2204 level Oct 19 resistance on Friday. Euro now seems ready to test support at 1.2045 Short-term support is well defined and medium term support is seen at 1.1923 followed by major support at 1.1875.

• Yen – 115.70

Prices continue to range between the levels of 114.60 – 116.00. Most analysts suggest a breach of the downside is more likely, with bearish divergence in place on the daily studies from overbought levels. However, while 114.60 holds the market could test resistance at the 116.25 to 116.90 which is expected to attract selling pressure.  

• Pound – 1.7740

The market closed well below the key 1.7817 level. This level represented the 38.2% retracement of the 1.8501-to-1.7391 decline of Sep-Oct. Failure to stay above this level indicates a possible test of short-term support which resides at Wednesday''s 1.7714 low.   Support after this level is located at 1.7650 with major support located at 1.7500. The next resistance level is now seen at 1.7946, the 50% retracement of the (1.8501-to-1.7391 Sept.-Oct.) decline.

• Aussie – 0.7495

                        Rory Kennedy

                        Sydney Dealing Desk
                        E-mail: rory@easy-forex.com

                        T: 1 800 176 935

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