Daily Forex Overview
Dukascopy Bank SA | Apr 23, 2008 08:00PM ET
Previous session overview
On Wednesday, the dollar rebounded from historical lows versus the euro as weak economic data in the euro zone led investors to take the view that Tuesday's dollar sell-off was overdone. Some of the pullback for EUR/USD was simply a result of positioning factors, because the market had been buying euros all week and it got a little ahead of itself.
The US dollar also gained ground after Luxembourg's Finance Minister Jean-Claude Juncker expressed concern that the pace of the greenback's decline will hurt economic growth.
EUR/USD - Closed NY at USD1.5890 and initially eased to USD1.5880 before edging to USD1.5897. Reversal gained momentum on reported comments from Greg Ip suggesting Fed may pause after its next 25bp cut. Move ran into decent French demand ahead of USD1.5850, after stops were triggered below Wednesday's base of USD1.5860.
Sterling strengthened versus the US dollar after Bank of England minutes showed two votes against easing policy this month. However, gains were short-lived as the news did not change expectations of another rate cut in June by the BoE. GBPUSD traded at a high of 1.9970 and a low of 1.9776 before closing at 1.9795 in the New York session.
The Japanese Yen crosses were mixed yesterday with USD/JPY rallying but many of the other yen crosses dipping despite a 42 point rally in the Dow. After breaking higher last Friday, there has not been much follow through in US equities, which leaves many traders nervous about whether risk appetite is really here to stay. USDJPY traded at a high of 103.79 and a low of 102.75, before closing at 103.47.
The Canadian dollar fell one percent against the US dollar on the release of a report that showed an unexpected drop in retail sales in February. It was the first decline in five months and a sign that strong consumer spending may be losing its resilience to the overall economic slowdown.
The Australian dollar surged to a 24-year high after inflation printed well above expectations. The headline CPI rose 1.3% in the March quarter, lifting the annual rate to 4.2%, while the RBA's core measures also rose to an average rate of 4.2%.
Market expectation
EUR/CHF is back above 1.61, largely due a closing of short positions with investors increasingly looking for stabilizing financial markets. The upside potential for the cross seems limited currently. The next key resistance is seen at 1.6231.
Data out Thursday on weekly U.S. jobless claims and new home sales, both of which are expected to show weakness, could put the greenback under pressure again.
The prospects for sterling are still very uncertain. But there doesn't appear to be much evidence to support a quick and sustained unwinding of the recent decline.
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A majority of economists expect Australia's central bank to keep monetary policy on hold and its cash rate at a relatively high level for the rest of the year while some expect the central bank to tighten further despite a deteriorating global environment.
USD/JPY - CPI is to be released on Friday with forecasts predicting an increase from 1% in March to 1.2%.
February's Current Account is to be released on Thursday following January's deficit of -USD19.1bn. Investment flow for February is also to be released on Thursday with January's results indicating a flow of USD22.1bn.
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