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Daily Forex Overview

Wed, Dec 17 2008, 09:18 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

The U.S. central bank said it will employ "all available tools to promote the resumption of sustainable economic growth and to preserve price stability." It added that "weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time."

On Tuesday, the EURUSD pair was again positively oriented even if momentum was initially less strong compared to the previous days. The Fed reduced its target rate to 0-25%.This Fed announcement only accelerated the sell-off in the US currency. EURUSD in two brief waves spiked higher from 1.3800 to the 1.41 area and closed the session at 1.4002, com-pared to 1.3688 on Monday.

Pound dipped initially to USD1.5560 in early Asia, as rate tracked early euro-dollar moves as the dollar extended its correction off post FOMC lows. Cable had seen highs in NY around USD1.5647. Cable recovered with upside momentum boosted from around USD1.5575 on reported UK clearer, option related demand. The move above USD1.5650 triggered stops which provided the added momentum to take rate on to highs of USD1.5724. Rate reversed off highs, again taking its cue from EURUSD slippage, trading back to USD1.5580 before settling around USD1.5600.

The Japanese Yen broke lower as the USDJPY-Equities relationship broke down and USD weakness saw the pair under 90.

The Canadian dollar strengthened against the greenback as oil and gold strengthened. In economic news, Canadian manufacturing shipments fell in September, the largest drop in 10 years.

Historic measures by the U.S. Federal Reserve to stave off a deepening recession and pump prime growth sent the U.S. dollar tumbling in Asia Wednesday, propelling the Australian dollar to a six-week high.

Market expectation

The euro remains on firm footing against the dollar and yen Wednesday, after the dollar tumbled sharply Tuesday once the Federal Reserve essentially cut interest rates to zero and indicated it would embrace further actions to stimulate the economy.

For GBPUSD offers seen placed back at USD1.5650, more toward USD1.5670 ahead of USD1.5690/00 and overnight highs at USD1.5724. Bids are placed USD1.5580, stronger between USD1.5560/50.

For EURUSD break below USD1.4040 expected to open a deeper pullback toward the area of Asian lows around USD1.4000. Offers seen placed back at USD1.4100, a break above to open a move on toward USD1.4130/35 ahead of USD1.4150/60 and USD1.4190/00.

The Fed's decision to lower interest rates from 1% to a range between zero and 25 basis points - levels last seen in the 1940s - boosted risk appetite and higher yielding currencies, although analysts cautioned the Australian dollar may struggle to gain further offshore.

Most important events of the day

Published on  Wed, Dec 17 2008, 09:21 GMT