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Daily Forex Overview

Fri, Aug 29 2008, 07:24 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Thursday, the dollar closely tracked crude futures against its major rivals and turned earlier losses into late gains as oil prices receded.

The anticipated wrath of Tropical Storm Gustav had sent traders from the dollar and pushed light, sweet crude for October delivery above USD120.00 a barrel. But pledges from the International Energy Agency and the U.S. Energy Department to provide emergency supplies reversed oil's rally and the euro's gains against the greenback.

The euro held gains, benefited from a surge in oil prices. Talk that euro zone interest rates may remain on hold at 4.25 percent to combat inflation helped the euro retain its strength.

Data from the U.K kept pound under pressure as house prices in August reported the biggest annual price fall for 17 years while retail sales posted the steepest drop since records began a quarter of a century ago. The British pound dropped to a new low of 1.8240 against the dollar.

Japanese inflation hits a new decade high, while unemployment fell and industrial output rose slightly. The Japanese Yen traded in a volatile manner tracking USD strength ending relatively unchanged as Equities rallied and Oil fell from highs. USDJPY traded with a low of 108.78 and a high of 109.72 before closing the day around 109.50.

Oil prices topping USD120 a barrel boosted the Canadian dollar. However, the market is disappointed that the currency was not able to extend gains further.

The Australian dollar was weaker during Asian trade Friday, having suffered sharp losses in the New York session on the back of forecast-beating U.S. growth numbers.

Market expectation

Analysts see that EUR's ability to benefit from ECB hawkishness won't last for long. Either ECB will desist from producing "hot air" or investors will start ignoring their warnings on rates and focus more on growth instead. The euro is slightly higher against the dollar and a bit lower against the yen. Dealers explained this divergent movement by saying the euro is gaining on the dollar because oil is higher, while lower against the yen because Japan's exporters were sellers.

Pound is under pressure in early Europe with rate easing through the Asian base at USD1.8271 to USD1.8266, as early Europe reportedly hunts for weak stops. Rate currently see meeting profit take demand, which is providing some buoyancy around USD1.8265. Below here and rate can ease toward NY lows of USD1.8240. Below here at USD1.8200 opens the next level of reported support with near term tech target seen at USD1.8176. Offers now seen placed at USD1.8300.

The local unit's focus will remain offshore in the immediate term, as geopolitical jitters and a tropical storm in the Gulf of Mexico threaten disruption to oil supplies.

Most important events of the day

Published on  Fri, Aug 29 2008, 07:28 GMT