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Daily Forex Overview

Mon, Jul 21 2008, 08:13 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

The euro closed little changed against the dollar Friday as U.S. stock markets and oil prices began to calm down following a week of turbulence.

The stability in stock markets Friday allowed a bit more risk appetite to filter back into currency markets, pushing down the low yielding yen slightly against the euro and the dollar.

The dollar also found some support from a better than expected earnings report from Citigroup. The U.S. banking giant posted Friday a loss of $2.5 billion, or 54 cents per share, in the second quarter.

German PPI came in stronger at 0.9% vs. expectations of 0.7%. The Euro was unable to hold these gains in the face of general USD strength. EURUSD traded with a low of 1.5807 and a high of 1.5886 before closing the day at 1.5845.

Pound edged down by 0.2 percent to 1.9973 on speculation that the U.K. government would increase borrowing. GBPUSD traded with a low of 1.9909 and a high of 2.0020 before closing the day at 1.9985.

The dollar advanced and was up 0.7 percent against the Japanese yen to 106.97. The positive sentiment in stock markets pushed the euro higher versus the Japanese yen as investors get funds in a country with low borrowing costs and buy assets where returns are higher. USDJPY traded with a low of 105.96 and a high of 106.94 before closing the day around 106.92.

The Australian dollar was stronger late in Asia on Monday, largely helped by the weakening U.S. dollar, having shrugged off producer price data which suggested inflation may have peaked. The second quarter producer price index rose 1.0% from the first quarter, below an expected rise of 1.5%, and rose 4.7% from a year earlier, compared with an expected rise of 5.2%.

Market expectation

AUDJPY's ascent to an 9-month high helped by thin liquidity and better tone in stocks, but positive open to European session means pair should hold their gains. Thin U.S. data calendar means AUDUSD will be flow driven, with good support at 0.9680.

Analysts doubt that dollar will continue to receive help from better performing stocks, given that the recent stocks rally is based largely on earnings reports that, while not as bad as anticipated, are still bad.

USDJPY under some slight pressure in Asian afternoon trade though trading conditions remain thin with Japanese markets close. Investors reluctant take too much more interest in USD from here; expected range in days ahead is 105-108. Despite some recovery in risk appetite, 108 resistance likely to be hold firm.

Most important events of the day

Published on  Mon, Jul 21 2008, 08:16 GMT