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Daily Forex Overview

Wed, May 28 2008, 09:32 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Tuesday, the dollar strengthened against the euro and on weaker-than-expected data out of the euro zone and an ease in crude oil's recent rally.

EURUSD rose to an intraday high around 1.5820, but then bounced all the way down to 1.5700, and 1.5670-1.5700 is the immediate zone of support. European data at that time further opened the downside in this pair. In technically inspired trading, the US dollar received some additional buying interest early in US trading.

Yesterday, a global constructive sentiment towards the dollar was also visible in USDJPY trading as the pair moved again above the 104 barrier. A reasonably good stock market performance in Asia and a correction in the oil price were other obvious reasons behind the rebound in this pair. The US eco data hardly can be considered as dollar supportive but they were largely ignored. USDJPY closed the session at 104.24.

The British pound's consolidation over the past few days ultimately led to a sharp sell-off of the currency as UK traders returned to the markets. Indeed, GBPUSD plunged over 100 points over the course of two hours, and the release of BBA mortgage approvals did little to revive the pair.

The Canadian and Australian dollars gave up some of their recent gains as oil and gold prices pulled back sharply, with crude futures finishing the day down 2.5 percent below USD129/bbl while gold futures fell 1.9 percent to USD907.70/oz.

Market expectation

Will the USD be able to weather a poor set of US durable good numbers? Calyon reckons that although lower aircraft orders and the overall decline in activity amid easing demand and rising costs means a likely decline in orders, the USD could be resilient. With equity markets regaining upward traction and the recent pickup in risk aversion stalling, the USD may be able to stretch the gains.

Today, the calendar contains the first German CPI data for the month of May and the US durable orders. Both are interesting from a market point of view.

EURUSD - extends recovery into the reported resistance area between USD1.5740/50. Further demand noted toward USD1.5760 with stops placed on a break above. If stops triggered seen opening a move on toward USD1.5780/85.

The euro is flat against the dollar Wednesday, but both are lower against the yen while the Tokyo stock markets tilted lower. Yet commercial demand for dollars was likely to limit the dollar's losses.

Several investors see that stagflation could yet prove a positive for the USD. Some doubt that the high inflation pressures will last. And, even if does, this will leave investors moving out of high-yielders, more to the benefit of the U.S. currency.

GBPUSD - pushes through reported resistance between USD1.9800/15. Investors talking that some stops were triggered on the move above USD1.9810, but rate only trades to USD1.9818 on the initial move. With larger stops above USD1.9820 remaining intact. If stops triggered seen opening a move on toward Tuesday's highs at USD1.9846, with offers noted toward USD1.9850.

Australia could fail to cash in fully on the ongoing resources boom if the government doesn't move quickly to align state policy with industry requirements for better infrastructure, a mature regulatory framework and a flexible skilled workforce.

Most important events of the day

Published on  Wed, May 28 2008, 09:44 GMT