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Daily Forex Overview

Mon, Jun 16 2008, 10:19 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Friday, the dollar surged to a one-month high against the euro after Irish voters rejected a reform plan aimed at making the European Union function better.

And the dollar gave back some of its gains during the North American trading session when a report showed U.S. consumer confidence was at a nearly three-decade low, which reminded investors about the struggling U.S. economy.

The euro weakened sharply against the U.S. dollar today as the single currency tested bids around the USD 1.5300 figure and was capped around the USD1.5480 level. The common currency reached its lowest level since 8 May as traders continued to bid the dollar higher on the notion that U.S. interest rates have further room to move higher than European interest rates. To this end, European Central Bank member Gonzalez-Paramo reiterated the central bank is only currently looking at raising interest rates next month in what would most likely be a +25bps adjustment to 4.25%.

The British pound gained ground against the U.S. dollar today as cable tested offers around the USD1.9510 level and was supported around the USD1.9410 level. Technically, today's intraday high was right around the 23.6% retracement of the move from USD2.0025 to USD1.9360.

The yen depreciated against the U.S. dollar today as the greenback tested offers around the JPY108.40 level and was supported around the JPY107.65 level. Technically, the pair reached its highest level since 14 February. As expected, Bank of Japan's Policy Board kept its overnight call rate unchanged at 0.50%.

The Australian dollar was weaker late in Asia Monday having run into stiff headwinds on heightened expectations that the Federal Reserve will hike interest rates underpinned the U.S. dollar.

Market expectation

The US dollar is expected to turn more positive versus the Swiss franc this week. The dollar's corrective phase is seen challenging the 1.0620/25 key resistance this week, with somewhat longer-term gains seen moving toward 1.1000.

The USD may be doing well now, but this may not last. US yields could well surrender some of their recent gains as more weak US data comes in this week and reminds investors that the Fed is not currently in a position to hike rates.

The latest TIC data later Monday should provide more support for the USD. Although flows in US equities may have been weak in April, Fed custody holding data suggests flows in Treasurys were once again strong

USDJPY is testing key resistance at 108.60, and if this is breached on a closing basis then it opens the topside towards 110.00. Now at 108.55, support is at 107.45, with a bearish reversal point below at 106.40. (SWFX)

Monday economic data release includes euro zone HICP final data (May), U.S. Empire state of manufacturing (Jun), foreign treasury buys (Apr), NAHB housing market index (Jun). And traders are waiting for the G8's discussion this weekend and further comments by Fed Chairman Bernanke on Monday.

Most important events of the day

Published on  Mon, Jun 16 2008, 10:21 GMT