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Daily Forex Overview

Thu, Nov 20 2008, 08:29 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Wednesday, the euro was whipsawed and finished the New York trading session down against the dollar, overcome by a big drop in U.S. stocks.

Funding currencies like the yen and the dollar tend to benefit when global equities fall on risk aversion.

Federal Reserve minutes said the central bank is ready to slash interest rates to levels last seen 50 years ago if the economic picture keeps worsening.

The single currency rose briefly to 1.2815 in U.S. morning on initial rise in U.S. stock markets and then tumbled to 1.2484 due to the late selloff in equities.

The British pound strengthened sharply against the dollar as the Bank of England minutes showed the BoE voted 9-0 in favor of cutting rates by 150 basis points in their last meeting. Later cable fell sharply to around 1.4950 in late U.S. session on active cross unwinding especially versus the Japanese yen due to the selloff in global stock markets.

On Wednesday, USDJPY to some extent avoided the wild intraday swings that were recorded in EURUSD and EURJPY. Mounting pressures on the (US) stock markets triggered another run on the yen and USDJPY closed the session at 95.73 compared to 97.03 on Tuesday.

The Canadian dollar fell against the dollar after Bank of Canada Governor Mark Carney commented on the struggles faced by the economy.

The Australian dollar was weaker late Thursday and looks poised to make a dash for multi-week lows as dark clouds gathered over equities markets on doubts over U.S. automakers' ability to secure a government rescue package. Australian dollar was trading at USD0.6345 down from USD0.6442 late Wednesday. Against the Japanese yen, it was trading at JPY60.385, down from JPY62.215.

Market expectation

The euro and dollar are lower against the yen on Thursday, while the euro is even but on the defensive with the dollar.

EURUSD currently trades around USD1.2505. Analysts mentioning bid interest remain in place at USD1.2470. A break below here will allow for a deeper move toward next support area around USD1.2450. Below here and rate can ease toward USD1.2400/1.2390. Resistance remains at the overnight highs at USD1.2527, through USD1.2530 and rate can push on toward USD1.2550 ahead of USD1.2600/10.

USDJPY could fall to 91.00 by year-end, as global markets shakier after U.S. Treasury's decision not to buy bad mortgage-linked assets from banks, says banking strategists. Since U.S. Treasury made that decision, prices of mortgage-backed assets such as RMBS have fallen, rekindling worries over health of U.S., Europe banks owning such assets; financial shares have thus fallen, which have dragged broad stock indexes lower, fanning risk aversion. U.S.'s recent PPI, CPI data also suggest more Fed rate cuts ahead, which could narrow U.S.-Japan rate gap in favor of JPY.

Strategists slash outlook for AUDUSD, now expecting pair to slump to 0.5400 till end-2009 from 0.6000 prior calls, and saying it could fall even more.

Most important events of the day

Published on  Thu, Nov 20 2008, 08:31 GMT