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Daily Forex Overview

Tue, Jun 3 2008, 09:17 GMT
by Raivis Zile

Dukascopy Swiss FX Group  |  View company's profile

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Previous session overview

On Monday, risk aversion overtook the foreign exchange market, as fears of further weakness in the financial sector nearly crushed all the dollar's intraday gains versus its rivals.

But the dollar managed to regain its lead against the euro later in a volatile, thin session. It also crawled back from a four-session low against the yen.

US data released yesterday were slightly above the expectations, but had little impact on the market. Manufacturing ISM rose from 48.6 to 49.6 in May, versus the estimate of 49.0. Construction spending slipped 0.4% in April after a 1.1% contraction in the previous month.

The euro consolidated between 1.55 - 1.56 on Monday, closing little changed from Friday's New York close, as Euro zone data pointed to an economic slowdown, while comments from an event to mark the ECB's 10th anniversary reiterated the Bank's hawkish tone. Purchasing manager's index for the Euro zone manufacturing sector slipped to 50.6 in May from 50.7 in April.

Te sterling lost more than 2 cents against the dollar after a UK mortgage lender announcement raised concern on financial sector problems. Britain's biggest lender of buy-to-let mortgages, Bradford & Bingley, revealed rising bad debts and lower lending had reduced its profit in four months to April by half. Also, an official report showed UK new home loan approvals hit a record low in April.

Yesterday, USDJPY slid lower throughout the session as the return of the credit cri-sis and the losses on the stock markets in Europe and the US triggered safe haven yen buying. Also in this USD cross rate, the better than expected ISM manufacturing hardly left any traces on the graphs as the market focus was obviously on other themes. USDJPY closed the session at 104.43, a loss of almost one big figure com-pared to the close on Friday.

The Australian dollar was not as immune as the NZD overnight. The AUD opened offshore trading on the back foot in the wake of a disappointing earlier retail sales release (-0.2% vs +0.2% expected), shedding about 20pts in early trading. But long term buyers just ahead of USD0.9500 stepped up and the AUD rebounded all the way back to 0.9560/70.

Market expectation

Bearish momentum should build in USDJPY if the rate holds below 104.50 this morning. USDJPY falls below 104.00 - more than 70 sen lower vs intraday high of 104.71 - as European players sell as report of possible losses. Tips support 103.80, then 103.00; last at 103.99. Asian players also selling; they expected Japan importers to support pair above 104.00, but importers' buying smaller than expected. (SWFX)

The euro is continuing Tuesday to hold its prior gains pending the U.S. labor data later this week. Dealers figures the euro will explore narrow ranges.

With the RBS leaving rates unchanged at 7.25% overnight and likely soft 1Q GDP numbers as well as record high in the 1Q current account deficit Wednesday adding to other soft economic data, the AUDUSD could well break under its recent trading low at 0.95. Only a renewed softening of the USD and a subsequent rebound in commodity prices may prevent this.

Today USA calendar is not very exciting. It contains the May car sales, the Weekly chain store sales and the April factory orders. Fed chairman Bernanke will speak too.

Today, the Euro zone calendar contains the producer price inflation data and the first breakdown of the strong Q1 GDP growth data. Those figures are no market movers.

Most important events of the day

Published on  Tue, Jun 3 2008, 09:21 GMT

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