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Daily Forex Overview

Tue, Dec 9 2008, 10:34 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Monday, the dollar fell to its lowest level this month against the euro on an injection of hope from Obama's economic plans.

U.S. President Elect Barack Obama's announcement of the largest infrastructure investment since the 1950s helped take some of the edge off fears about the U.S. economy, inspiring greater appetite for assets such as high-yielding currencies and commodities.

Euro rose to 1.2968 (highest since November 27) versus the dollar and 120.98 against the yen as investors increased their demand for riskier high-yield assets.

The British pound surged to 1.5050 in European morning session before retreating to 1.4782 on profit taking and also cross selling in sterling as concerns remained over the U.K. economy, with talk of an aggressive rate cut by the Bank of England at its next meeting.

The yen rose across the board in Asia on Tuesday as Japanese manufacturer's repatriated earnings while surprisingly lackluster Tokyo stock markets spooked Japanese investors into trimming overseas investments to bring money home.

The Australian dollar was firmer late Tuesday, as financial and asset markets responded favorably to news of yet another U.S. government fiscal stimulus package. The Australian dollar hit a one-month high of USD0.6684 in the Asian session but has since retreated as regional equities markets failed to follow a strong Wall Street lead.

Market expectation

Continued heavy tone into European trade has taken cable through the overnight base, extending to USD1.4803. Rate seen meeting demand interest placed on approach to USD1.4800, a break below can open a retest of NY lows at USD1.4782, with bids noted to USD1.4780. Through here and rate can sink on toward USD1.4750. Resistance seen placed at USD1.4850/60, stronger toward USD1.4880.

EURUSD in early European dealing support remains in place ahead of USD1.2850, with interest said to extend toward USD1.2840 (USD1.2843 NY low Monday), stops below. If stops triggered can seen opening a deeper move toward USD1.2810/00. Offers noted toward USD1.2900, more between USD1.2920/25.

Some traders from Tokyo said the yen's upward trend may have more room to run. Japanese investors' repatriation ahead of their March-end book closing is expected to become more pronounced over time, while deep-rooted worries over U.S. and global economic downturns - despite prospects of a major U.S. stimulus package - will keep the yen attractive as a low-risk currency.

There is growing speculation the greenback may be starting to lose its shine as a safe haven asset, which could lend some strength to the Australian currency.

Among events attracting attention from now is Germany's ZEW indicator of economic sentiment for December due later in the global day. Economists expect a reading of minus 64.0 on current economic conditions, worse than the previous month's minus 50.4.

The Bank of Canada's interest-rate decision later Tuesday is also high on traders' watch list.

Most important events of the day

Published on  Tue, Dec 9 2008, 10:35 GMT