Australian FOREX Daily Oulook 25/11/2005

MARKET SUMMARY – 25/11/05(03.00GMT)
                                                                     

• The Dollar rose against the major currencies in the London session. There was little action in the New York session with US financial markets closed for Thanksgiving Day holiday. US initial jobless claims are due on later today with the market expectations centered on 318k.   

• The Euro dipped from 1.1822 down to 1.1780 after the IFO data. The influential IFO institute survey of German business confidence fell to 97.8, below forecast, from 98.8 in October. The worse than expected survey caused some uncertainty about the future course of Eurozone interest rates. However, the index remains well above its recent low of 93, reached in May, and is still higher than the 10 year average of 94.5. European sharemarkets finished slightly lower as the German IFO business climate survey showed a surprise slip in German business confidence. The euro zone current account deficit widened to 4.8 billion euros in September from 1.7 billion in August. 

• The Japanese yen traded in a narrow range of 118.62 to 118.95 given the thin trading conditions during the US holiday. The Japanese yen weakened in the Asian session to JPY119.20 per US dollar despite core CPI for October coming in line with market expectation. Perhaps some were betting on a positive result and hence an imminent end to the BOJ’s quantitative easing policy. 

• The Pound hit a one-week high against the dollar, rising  from 1.7200 level up to 1.7285 and also gained against  the euro after testimony from Bank of England policymakers on last week’s inflation report encouraged speculation that UK rates will remain steady, after a quarter-point cut to 4.5% in August. However sterling lost ground in the afternoon session trading back down to 1.7220 level, after BoE policymaker Rachel Lomax said the dollar looked a good buy due to interest rate differentials. 

• The Aussie dollar rose against the dollar from 0.7370 to a high of 0.7404 on the back of stronger base metals prices. 

TECHNICAL COMMENTARY

• Euro – 1.1770

Recent consolidation has defined initial support at 1.1690, Nov 22 low followed by 1.1644, the Nov 15 low which also represents this year''s low. Resistance is located at the former 1.1877 support marking the Oct 19 low. Clearance of 1.1877 would open the door for a climb towards 1.1907 and 1.1969 (50% and 61.8% retracement levels 1.2170 to 1.1644 decline). Clearance of 1.1969 is required to suggest some form of trend reversal.

• Yen – 119.25

Trendline support is located at 118.20 and a break of this level would provide the first sign of further weakness and would bring Nov 9''s 116.86 low into play. A loss of this level would provide confirmation of an interim top at 119.57, the high from Nov 16. The broad up-trend remains intact, with fresh upside beyond 119.57 seen as the catalyst for an extension towards 119.83, the high from Aug 19, 2003, then 120.73, the peak from Aug 1, 2003.

• Pound – 1.7225

For renewed weakness to occur a move below Tuesday''s 1.7065 low is necessary to signal a test of the psychological 1.7000 level. For renewed upside a break of  1.7261 would yield further corrective gains towards 1.7326, former support from Nov 8, but with scope for 1.7388, the 38.2% retracement of the 1.7904 to 1.7065 decline thereafter.

• Aussie – 0.7370

Aussie failed to make decisive headway beyond 0.7392, the 38.2% retracement of the 0.7605 to 0.7261 decline, Monday''s move through former resistance at 0.7356 and 0.7397 defined the very short-term trend as up, with weakness below last Friday''s 0.7300 low required to threaten the positive tone

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