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Daily Forex Overview

Fri, May 23 2008, 08:47 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Thursday, the dollar rose as a better-than-expected U.S. jobs report gave investors a reason to buy an oversold buck.

The US dollar managed a modest recovery after a sharp fall in recent days. Stronger jobless claims figures, while not markedly better than expected, got the ball rolling in the USD, and a fall in crude oil prices from record highs provided further support. US interest rates also finished the day 10-15 basis points higher.

The Euro gave back some of the gains made this weak on the back of weaker then expected Industrial New Orders coming in at -1.0% vs. -0.4% expectations. EURUSD traded with a low of 1.5693 and a high of 1.5814 before closing the day at 1.5710 in the New York session.

UK retail sales fell 0.2% in April, in line with our forecast, confounding the expectations of some analysts that sales might slump as much as -3% in the month. GBPUSD traded with a low of 1.9687 and a high of 1.9848 before closing the day at 1.9810 in the New York session.

The dollar also advanced against the yen as U.S. stock markets traded in positive territory and crude oil prices fell off the new highs. This led to an increase in risk appetite that tends to cause the low-yielding Japanese currency to be sold. USDJPY traded with a low of 102.73 and a high of 104.38 before closing the day around 104.30 in the New York session.

The Australian Dollar felt from 24 year record highs on the back of weaker commodities and heavy AUSNZD sales after yesterdays NZD budget. AUSJPY benefited from the USDJPY rally closing New York at 99.50. Overall the AUDUSD traded with a low of 0.9547 and a high of 0.9651 before closing the day at 0.9557 in the New York session.

Market expectation

The continued strength in crude oil prices and the earnings season will exert downside pressure on risk assets as risk aversion remains high. But, the impact on the USD is less certain. Risk aversion may lead to heavy USD-positive de-leveraging across the board, but the greenback will suffer if equities resume their slump as inflation concerns escalate.

Many key U.S. indicators due next week are expected to worsen, such as consumer confidence and new home sales.

Manufacturing and services PMI are made public, and is expected to give the market a clearer picture of current economic conditions in the Euro-zone.

USDJPY still runs risks of falling to 103.50 soon as players may resume selling since crude oil prices could rise again, rekindle fears for U.S. economy.

Expect recent highs in AUDUSD around 0.9650 to be good areas for selling heading into European trade.

Friday will see the release of BOJ minutes, German and euro zone PMI manufacturing and service data, U.K. GDP( markets looking for 0.4%.)and U.S. existing home sales.

Most important events of the day

Published on  Fri, May 23 2008, 08:50 GMT