Daily Forex Overview

Previous session overview

On Wednesday, the dollar was knocked down by a weak U.S. private-sector jobs report and worries from European Central Bank President Jean-Claude Trichet that inflation there may "explode."

Those expectations helped push the euro to as high as USD1.5889 Wednesday, a 10-week high and not far from its lifetime high of USD1.6020.

EURUSD rallied through resistance at 1.5850 as Oil jumped higher. May PPI came in strong at 1.2% m/m confirming inflation fears in the Euro zone. The Market shrugged off US President Bush's comments about a strong Dollar policy. EURUSD traded with a low of 1.5787 and a high of 1.5889 before closing the day at 1.5883.

The Sterling helped lower in the European session from Dovish comments from BoE member Bean highlighting the risks to the downside. GBPUSD traded with a low of 1.9890 and a high of 2.006 before closing the day at 1.9941.

USDJPY was driven by the USD leg, up to a high of 106.77 before trading back below 106.00 later on as US equity sentiment deteriorated once more, helping the yen attract safe haven bids.

The US dollar has been consolidating against the Japanese Yen for the past 3 trading days and judging from the price action of the currency pair, it is prime for a breakout.

The Canadian dollar rose against the US dollar after a soft US jobs report continues to rattle the greenback.

The Australian dollar was mildly firmer Thursday, strengthened by a weaker U.S. currency but largely range bound ahead of key U.S. labor data and the European Central Bank's interest rate decision.

Market expectation

Fears of out of control inflation in the euro zone virtually ensure the ECB will hike interest rates after its policy meeting Thursday, providing the euro with an even better interest-rate return advantage over the dollar. Analysts say price pressure may even force the ECB to consider more rate increases later on.

The euro's record against the dollar may be tested Thursday after the ECB rate decision.

The U.S. government's June employment report is also due Thursday, which is expected to be weak and could be another catalyst for the dollar to sink to new lows.

USDJPY may not be able to rise above 107 for now as many offers above 106.50.Players await ECB chief Trichet's press conference as well as U.S. jobs report later. Adds if Trichet signals additional near-term rate hike, U.S. jobs fall more than forecast, pair may drop below 104.

With no major economic data due this week for Canada, traders will be focusing more attention to US economic data. Crude inventories data due in the US will be key to how the Canadian dollar moves as it's a key exporter of oil and gold.

Most important events of the day