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Daily Forex Overview

Wed, Jun 25 2008, 07:55 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Tuesday, the dollar weathered a decline versus the yen and euro on a dismal June consumer confidence report, and stayed within recent ranges ahead of the close of the Federal Open Market Committee meeting.

The dollar's range bound trading has lessened currency market volatility, encouraging the carry trade strategy. As a result, the euro hit an 11-month high Tuesday of Y168.38.

The Euro strengthened against the US dollar thanks to stronger economic data from France. Euro zone's second largest economy showed some promise in spite negative consumer confidence reports from Germany, and Italy. Euro zone PMI fell to its lowest level since May 2005.

On Tuesday, the disastrous US consumer confidence release was the only move worth mentioning for the USDJPY price action. The pair opened in the 108 area and lost a few ticks going into the US trading session. The collapse of the US consumer confidence caused a brief spike lower in USDJPY and the pair tested bids in the 107.40 area.

The UK economic calendar is completely devoid of any market moving data this week other than the final first quarter GDP numbers and the current account balance expected on Friday. The Sterling grinded higher on greenback weakness but gains were hampered by traders trimming their expectations of BoE rate rises as the housing slump deepened. BBA Mortgage approvals fell to 28K in May down from 35K in April and down 56% from last year. Overall the GBPUSD traded with a low of 1.9627 and a high of 1.9723.

The Australian dollar was stronger against the U.S. currency late Wednesday as U.S. economic data showing poor consumer confidence and a rapidly weakening housing market weighed on the greenback. Trade in foreign exchange markets during the Asian session was extremely subdued as market participants held cautious positions ahead of the Federal Open Market Committee's interest decision due later Wednesday.

Market expectation

EURUSD falls, likely due to expiry of EURUSD options held by Japanese player. For now, no big moves expected as players await FOMC decision, statement due later in global day.

Traders wait to see if the Fed backs away from its recent hawkish rhetoric while expectations remain intact for an eventual rate hike by the European Central Bank. If the Fed indeed tones down its view, the euro stands to gain.

USDCHF seems to have priced-in recent negative economic data such as poor US economic indicators. All eyes Wednesday are on the Fed announcement later but the potential for a surprise is limited, according to the bank.

AUDUSD could break 0.96 if Fed statement will be soothing tonight the pair could push below 0.95.

Today's euro zone data calendar is very thin and only contains the industrial new orders, which are expected to fall for the second consecutive month in April.

Most important events of the day

Published on  Wed, Jun 25 2008, 07:57 GMT