Daily Forex Overview

Previous session overview

On Tuesday, the dollar traded near its all-time low against the euro Monday as investors weighed the ramifications of a government plan to rescue battered mortgage giants Fannie Mae and Freddie Mac.

The Euro hit another record high against the Japanese Yen as growing concerns in the US economy continue to push the US dollar lower against the Euro. May Industrial Production came out weak at -1.9% confirming the slowdown in the Euro zone. EURUSD traded with a low of 1.5842 and a high of 1.5971 before closing the day at 1.5908.

The British pound strengthened against the US dollar, Euro and Japanese Yen as producer prices grew by the fastest pace in 22 years. The annualized pace of PPI growth jumped to 10 percent last month even though the monthly pace slowed.

USDJPY yesterday held a rather tight trading range in the low 106 big figure. The US dollar gained early in the session on the GSE measures taken over the weekend. However, US stock market reaction and ongoing high oil prices soon blocked the upside. USDJPY closed the session at 106.15.

The Australian dollar hit a fresh 25-year high Tuesday, as jitters surrounding the U.S. financial sector and economy continue to weigh the U.S. dollar.

Market expectation

Investors are now awaiting U.S. Congressional testimony later Tuesday from Fed chief Ben Bernanke and Treasury Secretary Henry Paulson, on both monetary policy and the recent moves to bolster the mortgage firms.

Analysts say the dollar could get a large boost if the Fed chief expresses the possibility of interest-rate hikes in the coming months to deal with rising U.S. inflation amid sharply higher oil prices. But even without any hawkish talk on inflation, the dollar may drum up some support if Bernanke simply shows confidence in the U.S. banking system as a whole.

USDJPY may fall tad further but likely supported around 105.60 for now, helped by JPY-crosses. The fate of USDJPY will depend on whether the losses in the stock market continue.

Most important events of the day