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Daily Forex Overview

Wed, May 14 2008, 07:54 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Tuesday, the dollar rose against the euro and the yen with help from the report on U.S. April retail sales, which offered signs of hope for the economy.

The dollar also drew support from various Federal Reserve speakers Tuesday, who seemed to focus on inflation concerns, a sign that the interest rate cuts that have hurt the dollar's yield may indeed be on pause.

The Euro lost ground against a resurgent dollar buoyed by economic data and central bank rhetoric, in what was an otherwise quiet session in the Euro-zone. EURUSD traded with a low of 1.5430 and a high of 1.5565 before closing the session at 1.5476 in the New York session.

Sterling remained weaker despite the release of strong CPI figures out of the UK. CPI jumped to 3.0 percent well above market expectations for a rise of 2.6 percent. The core release also rose from 1.2 percent in March to 1.4 percent in April. GBPUSD traded with a low of 1.9421 and a high 1.9587 before closing the day at 1.9456 in the New York session.

The Japanese Yen edged higher throughout the day on the back of a buoyant dollar and reports that the Chinese Yuan would appreciate by 7% throughout the year. USDJPY traded with a low of 103.40 and a high of 104.92 before closing the day at 104.80 in the New York session.

The Canadian dollar remained supported despite oil prices retreating from record highs. Even with oil dropping below USD124 a barrel the loonie remained underpinned against the greenback.

The Australian dollar was lower late Wednesday as the U.S. currency continued to mount a measured but solid resurgence, as data showed the U.S. economy isn't as bad as many investors have feared. Australian wages data released Wednesday also weighed on the Australian dollar as market participants scaled back expectations for a near-term interest rate rise by the Reserve Bank of Australia.

Market expectation

The euro is lower against the dollar and the yen, but is unlikely to fall below USD1.5400 on possible buying by investors who expect interest-rate gaps between the U.S. and euro-zone to remain wide. Given that global commodity prices continue rising, inflation worries in the euro-zone likely won't recede soon. So, lingering speculation that the ECB may not cut interest rates anytime soon could support the euro.

USDCHF is gaining momentum after holding above its recent close, above its key 9-day moving average. Short term key resistance at 1.0625/20. After that, the path may be clear to 1.0850.

Look for the greenback to remain range bound against its major counterparts ahead of key releases later this week, with CPI tomorrow, Philly Fed. on Thursday and consumer sentiment on Friday.

The market will look towards Canada's survey of manufacturing due out on Thursday for further direction into the USDCAD currency pair. Ahead of that release look for the commodity linked currency to continue to be driven by oil prices.

Most important events of the day

Published on  Wed, May 14 2008, 07:58 GMT