FOREX Trading Australia Daily Outlook 05/05/2005

FOREX Outlook 05/05/05 (02:00 GMT)

FOREX Trading Australia - Foreign Exchange Market Summary

Dollar

· Dollar lost some ground after the Fed’s addition of the statement that implied long term inflationary pressures were well contained but rate outlook remains mixed with focus on data outcomes. Data was mixed as the headline ISM Services index came in slightly better than expected but the employment sub index fell sharply boding ill for the Payrolls number tomorrow. U.S. Crude oil stocks continue to rise but oil prices have remained above $50 pb as refinery problems persists while demand is keeping its steady pace.

Euro

· The Euro didn’t have enough momentum to break above 1.30 and has stabilized around 1.2950. Services PMI declined in line with expectations given recent soft conditions but Retail sales came above forecasts. The ECB kept rates on hold at 2% and Trichet set the tone for the rest of the year by ruling out any rate cut or hike and stated that the economy faces downside risks. French and German markets are closed today with the Euro likely to be directionless ahead of tomorrow’s U.S. data.

Yen

· The Yen continued to garner support on the Yuan story gaining towards 104.25 before a statement by Chinese Finance Minister that implementation of reform of the exchange rate system becomes difficult in a environment of excessive speculation, led the Yen come of its highs. But as many sections of the market expect a Yuan revaluation in the near term the Yen continues to remain well bid. Japanese markets remain closed today.

Pound

· The Pound managed to break back above 1.90 on Dollar’s general weakness while the higher than expected outcome in Construction PMI with the employment sub index posting a healthy rise. Focus shifts to the U.K. election with Prime Minister Blair’s Labour party set to retain power; however a loss of majority or a hung parliament would be very bearish for the Pound.

Australian Dollar

· The Australian dollar after its brief foray above 0.78 on general dollar weakness has slipped back towards 0.7770 as the Trade Deficit, widely expected to narrow, has in fact widened further. Recent data points to the RBA staying on hold and the next move could even be a rate cut early next year. However the Aussie is not slipping as it should due to the anticipation of U.S. payrolls data and chances of Yuan revaluation in the near term.

Economic Data Released

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*Only key potential market moving data is mentioned, for a detailed Economic Calendar please click on the ‘Financial Calendar’ link on the web-site.

FOREX Technical Analysis

EUR/USD – Yesterday’s low was 1.2875 and high was 1.2972.
The pair closed at 1.2942.

The pair has rallied towards 1.2955 post FOMC’s clarification with more volatile moves likely. Poor data from the zone and conflicting signals from the U.S. Fed are keeping the direction a bit mixed. Mild resistance exists around 1.3010-25 followed by a stronger one in the 1.3095-1.3115 zone. On the downside mild support exists around 1.2875 with a break below targeting the good buying zone of 1.27795-1.2815.

Key resistance is seen at 1.3015 followed by 1.3125 while support starts at 1.2875 followed by 1.2795.

USD/JPY – Yesterday’s low was 104.19 and high was 104.96.
The pair closed at 104.53.

Japanese markets remain closed while movements are directed by Dollar’s general direction. The pair managed to break below 104.55 but another statement from China has sent it off its lows. On the upside the Yuan story is keeping the Dollar well bid with decent offers around 105.50 for this pair. While any foray towards 106.25 should see strong selling interest.

Key Resistance is seen at 105.55 followed by 106.25 while support starts at 104.25 followed by 103.70.

GBP/USD – Yesterday’s low was 1.8924 and high was 1.9031.
The pair closed at 1.9005.

The pair has inched back above 1.90 post FOMC with U.K. remaining mixed. It is still within its recent broad range and since weak data is expected to continue coupled with the uncertainty of the election outcome, the Pound remains at mercy to the general direction by the Dollar. On the upside mild resistance exists around 1.9055-70 followed by a stronger one around 1.9125. Any foray close to 1.92 should see strong selling interest. On the downside support exists around the pivot mark of 1.8940 followed by stronger one above 1.8875.

Key Resistance is seen at 1.9075 followed by 1.9125 while support starts at 1.8940 followed by 1.8875.

Australian Dollar

AUD/USD – Yesterday’s low was 0.7730 and high was 0.7815.
The pair closed at 0.7798.

The Aussie is back to square one as the RBA stays on hold while the Fed’s less hawkish tone has kept the pair above the 0.7755 support mark. It has strong support and buying interest on dips down to 0.77. While the market is eyeing the RBA’s monetary policy statement released on Friday. Commodity prices remain mixed with strong resistance in the 0.7825-40 zone for this pair.

Key Resistance is seen at 0.7840 followed by 0.7875 while support starts at 0.7725. followed by 0.7695.

Kunal ‘Kris’ Sharma
Forex Analyst
E-mail: kris@easy-forex.com

Australian Financial Services License 246566

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