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Daily Forex Overview

Tue, Dec 16 2008, 08:35 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Monday, the dollar sank mightily against many of its major counterparts, weighed down by sustained economic pessimism and caution ahead of Tuesday's Federal Reserve interest rate announcement.

The euro rocketed to near nine-week highs around USD1.3700 Monday, supported by a barrage of recent commentary from European Central Bank officials suggesting that the ECB may be less aggressive than other major central banks in easing monetary policy soon.

The British pound rocketed over 300 points higher versus the US dollar on Monday morning, but it was not enough to keep the currency from reaching record lows against the euro for the third consecutive trading day.

The greenback dropped against the Japanese yen from JPY91.99 to JPY90.25, however, downside was limited on speculation that the Bank of Japan could intervene to stem further strength in the Japanese currency.

The Australian dollar was marginally firmer late Tuesday, keeping relatively tight ranges ahead the U.S. Federal Reserve's crucial interest rate decision.

Market expectation

The euro hit a two-month high of USD1.3736 on Tuesday as non-Japan players sell the dollar versus majors (except the yen) ahead of the FOMC's rate decision, noted traders. The euro has also broken above some key levels on charts versus the dollar, which fueled the pair's advance.

EURUSD probes below the Asian base at USD1.3685, as market hunts for stops, the rate able to ease to an early low of USD1.3672 before recovering back to USD1.3680. Bids remain placed to USD1.3670 a break to open a deeper move toward USD1.3630, traders suggest. Offers noted between USD1.3720/25, a break above to open a retest on overnight highs at USD1.3738. Talk earlier suggested option related offers clustered around USD1.3740 ahead of a reported barrier at USD1.3750. Stops noted on a break of USD1.3750/55.

Pound break below USD1.5280 triggers stops, the added weight easing the rate back to challenge support around USD1.5250. Demand here so far has been able to cushion the move, with rate currently trading around USD1.5257. A break and clear below USD1.5250 to open a deeper move toward USD1.5210/00. Offers now seen placed toward USD1.5320.

A likely interest rate cut and more formalized move toward quantitative easing by the U.S. central bank is expected to weigh on the U.S. dollar, which will support higher-yielding units like the euro and Australian dollar.

Most important events of the day

Published on  Tue, Dec 16 2008, 08:40 GMT