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Daily Forex Overview

Tue, Jun 10 2008, 08:20 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Monday, the dollar U.S. officials gave the dollar a lift against the euro and the yen.

At the start of trading in Europe, EURUSD tested the 1.5820 resistance area. The pair briefly traded above this level, but a sustained break didn't occur and later in the session EURUSD dropped two big figures. Interest rate differentials were part of the explanation. Hawkish US comments weighed heavy on the single currency, encouraging a test of the downside. EURUSD traded with a low of 1.5620 and a high of 1.5843 before closing the day at 1.5652 in the New York session.

The British pound extended its gains as producer prices grew by the fastest pace in over 20 years. May PPI input was at 3.8%. GBPUSD traded with a low of 1.9665 and a high of 1.9801 before closing the day at 1.9748 in the New York session.

After dropping close to 400 points on Friday, the stock market rebounded, helping the Japanese Yen crosses to recover. Economic data from Japan was slightly weaker than expected last night with the eco watchers survey dropping to 32.1 from 35.5.

The Australian dollar retreated from USD0.9647; close its 24-year high, Monday as the U.S. dollar found strong support on comments from Treasury Secretary Henry Paulson that government intervention in the market to bolster the greenback's value remains a possibility. The Australian dollar was weaker late Tuesday as continued jawboning from U.S. policy makers boosted speculation the U.S. government would not shy away from greenback intervention and highlighted inflationary risks ahead.

The Canadian dollar sold off significantly as the combination of dollar strength and commodity price weakness drives the currencies lower. The bullish run in commodities is largely dependent on the trend of the US dollar.

Market expectation

The U.S. dollar pushed higher Tuesday with U.S. Treasurys and Asian government bonds dropping after Federal Reserve chief Bernanke's hawkish comments raised talk of a U.S. rate rise as soon as September. The dollar is gaining Tuesday against the yen and euro after official jawboning to support its value. But even so, dealers are skeptical. Euro buyers are said to be waiting at USD1.55 and USD1.54.

Bernanke's hawkish comments now put US CPI figures on Friday in the hot seat. "US consumer prices are set to play a key role especially if they further underline current price pressures and the Fed's concerns".

Today's data shouldn't be influential. The Bernanke comments overnight will of course keep investors edgy and trading may remain wild.

GBPUSD falling to the day's low of 1.9603, and trader sis hearing of stops below 1.9580.

Stronger USD makes it harder for AUDUSD to break higher. Higher USD reinforces significance of failure of AUDUSD to move above key 0.9650. Now move below daily trend support of 0.9420-0.9450 area will see a test of more significant support around 0.9300.

Most important events of the day

Published on  Tue, Jun 10 2008, 08:23 GMT