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Daily Forex Overview

Thu, May 29 2008, 08:34 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Wednesday, the dollar rose against the euro and the yen after a report on U.S. durable goods orders was not as bad as economists were expecting.

Orders for U.S. durable goods orders excluding transportation equipment rose 2.5% in April. Overall orders fell 0.5%, better than the expectation of a decrease of 1.5%, after a 0.3% drop in March. Interest-rate futures showed a 31% chance the Federal Reserve will raise its target rate by a quarter-percentage point to 2.25% on Sept. 16, up from 21% a week ago.

The dollar also garnered strength Wednesday from comments by Federal Reserve Bank of Minneapolis President Gary Stern. He said the pace of U.S. inflation is too fast, and said keeping prices under control remains a key goal of policy makers.

The EURUSD tumbled from 1.5761 to 1.5608 on Wednesday on dollar's strength across the board on the better-than-expected U.S. durable goods data together with a separate report which showed French consumer confidence dropped to a record low in May. However, euro pared its losses later in the day after a report showed inflation in Germany accelerated more than forecasted in May. German consumer prices rose 3% in May from a year ago after rising 2.6% in April.

Pound showed some wild moves in the yesterday's session as it plummeted to a low of 1.9705 due to the strong US durables goods data but a good recovery was seen later as it surged up and was capped at 1.9826.

Yesterday, USDJPY took a rather poor start today as Japanese stock markets failed to join the improving sentiment in the US and Europe. However, the stock market gains in Europe and even more the steep decline in oil prices also triggered a rebound in USDJPY and the pair set an intraday high in the 105.30 area.

The Australian dollar retreated initially to 0.9562 against U.S. currency as crude oil for July delivery dropped briefly to USD125.96 per a barrel and then rebounded to close at 0.9629 on renewed buying in crude oil later in the day.

Market expectation

Hidden among the good news of 1Q US GDP revisions later in the day could be some reasons to sell the USD. ING warns that although growth could be revised up over 1.0% from 0.6%, the data could also show a continued downward trend in US corporate profits.

As the GBPUSD falls under support at 1.9715, the next key level is 1.9685. The GBP is diving down to USD1.9687 from an earlier high of USD1.9815 after Nationwide reports a record drop in UK house prices. The building society says prices fell 2.5% in May and were down 4.4% on the year.

USDJPY would need to close over 105.70 to argue for a rise to 106.70. But, the banks noting that rise over key resistance at 104.35 could help the pair test the 105.70 level, the high of the trading range over the last few weeks.

After breaking through its 27-day moving average at 1.5590, the EURUSD looks likely to extend its losses to its May 16 low at 1.5435 and then its recent May low at 1.5285. The several banks suggest selling into any rallies to the 1.5680/1.5770 region with stops over 1.5865.

Today, the calendar contains sentiment indicators from the European Commission, the M3 Money supply data and the Retail PMI. In the US, the preliminary GDP data and the claims will be released.

Most important events of the day

Published on  Thu, May 29 2008, 08:41 GMT