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Daily Forex Overview

Wed, Aug 6 2008, 07:32 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Tuesday, the dollar defended its gains against the euro despite a tempered statement from the FOMC. The FOMC voted to keep its key lending rate steady at 2.0% for the second consecutive meeting. Only Dallas Fed President Richard Fisher voted for a rate hike.

EURUSD closed in NY Tuesday at USD1.5453/55, with trade during the latter part of the session contained within a USD1.5445/95 range. Rate marked lows at USD1.5450 before lifting on decent euro-yen demand. Rate paused at USD1.5470 but a second wave of buying took rate on to USD1.5501.

The British pound tumbled toward support at 1.9525 on Tuesday as UK industrial output contracted for the second month in a row and kept the annual rate down to -1.6 percent. GDPUSD traded with a low of 1.9524 and a high of 1.9611 before closing the day at 1.9555.

The Japanese yen rose slightly versus the majority of the majors, but fell against the US dollar as indicators of risk sentiment - such as the CBOE's VIX Index - declined while and US equity markets rallied. USDJPY traded with a low of 107.68 and a high of 108.34 before closing the day around 108.18.

The Canadian dollar fell for the fourth straight day as commodities and oil prices declined. A stronger dollar, a retreat in oil and gold prices, and news that Canada's economy shrank by 0.1% in May from April, put pressure on the Canadian currency.

The Australian dollar was weaker late Wednesday as traders continued to sell the currency on increasing expectations of an official interest rate cut as early as next month. Most of the selling of the Australian dollar had come through technical trades with the currency having broken several key technical levels in recent days. Economic data released Wednesday confirmed RBA expectations domestic demand was easing with Australian housing finance falling for a fifth consecutive month in June to a four-year low.

Market expectation

The risk is that the Assume dollar trades as low as US$0.89 before it ultimately finds a bottom. Momentum to the downside remains very strong and that's against a backdrop where the U.S. dollar remains very well bid.

The data calendar is very light today, with German industrial orders on tap and additionally today we'll see the release of BRC Shop Prices for the month of July, but given persistent price growth in the UK economy, there's some upside potential for this report. However, the British pound may trade more based on anti-dollar sentiment.

For Pound offers are placed toward USD1.9600, with interest extending to USD1.9610. Further offers close behind between USD1.9620/30. Bids now seen placed at USD1.9550, with strong demand noted on the approach to USD1.9520.

Most important events of the day

Published on  Wed, Aug 6 2008, 07:34 GMT