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Daily Forex Overview

Tue, Nov 25 2008, 08:38 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Monday, the dollar dropped across the board on a rally in U.S. stocks.

The US dollar and Japanese yen - the biggest beneficiaries of flight-to-quality and deleveraging - both tumbled on news that the Treasury, Federal Reserve and Federal Deposit Insurance Corp.

On Monday, EURUSD set an intraday low in the 1.2570 area early in European trading, but from that moment on, the pair performed quite an impressive, uninterrupted ascent that lasted into the close of trading in the US. EURUSD closed the session at 1.2953, close to the intraday highs. This was quite a spectacular gain compared to the 1.2587 close on Friday.

The British pound rose on Monday amidst broad US dollar weakness and the announcement of a fiscal stimulus plan for the UK.

The Japanese Yen was the weakest currency last night as traders risk appetite surged with stocks. Carry trades benefited with AUDJPY and EURJPY outperforming gaining over 5% each. USDJPY traded with a low of JPY94.96 and a high of JPY97.42 before closing the day around JPY97.10.

Stronger regional equities and risk appetite buoyed higher yielding currencies such as the Australian dollar and weakened Australian bond prices Tuesday.

Market expectation

The euro and dollar are lower against the yen Tuesday as Japan's exporters purchase their currency for settlement purposes, according to traders. The euro also is lower against the dollar as news of the Citigroup rescue wears off.

EURUSD and EUR0.1JPY catapulted to 2-week highs, oil bounced USD5 and commodity markets recovered. However, although the Nikkei managed a 5.2% gain Tuesday, European bourses and US stock futures are looking at negative opens and the major FX pairings are one, in some case two big figures off their day's highs already.

For GBPUSD demand seen placed between USD1.5070/50, more around USD1.5025/20. Resistance are placed USD1.5120/30, a break above to open a move back toward USD1.5150/60 ahead of USD1.5190/00. Lot of talk this morning of trade linked to MSCI reweighting, said to be yen positive, negative for euro and sterling.

EURUSD currently trades around USD1.2845 in early European dealing. Support remains in place at USD1.2820, a break below to open a deeper move toward USD1.2800 ahead of USD1.2780. Below here and rate can sink toward USD1.2755/50. Resistance USD1.2960, with stronger, French name, interest reported at USD1.3000. Interim offers USD1.2875/80.

The sustainability of the better mood will be tested later in the day with a raft of U.S. data expected to again illustrate the depth of slowing in the world's largest economy. Consumer confidence, the Case-Shiller Home Price Index and the second reading of third-quarter gross domestic product are all expected to highlight a mood of doom and gloom for the U.S. economy.

Most important events of the day

Published on  Tue, Nov 25 2008, 08:40 GMT