Daily Forex Overview

Previous session overview

On Thursday, the dollar was higher against the euro despite more recession-like U.S. economic data, as a drop in oil prices led investors to quit bets on commodities and return to the refuge of the U.S. currency.

But a late afternoon rally in U.S. stock markets reversed much of the safe-haven buying of the dollar, leaving the greenback only modestly higher against the common currency from day-earlier levels.

On Wednesday, EURUSD again experienced some wild intraday swings but at the end of the session the changes were again limited. An awful start of the (stock) markets in Asia hammered EURUSD to an intraday low in the 1.3350 area. After battering of the US and Asian stock markets, Europe opened materially lower, too but the pressure eased somewhat during the morning session and this helped EURUSD to regain the Asian losses. The pair closed the session at 1.3456 compared to 1.3499 on Wednesday.

The British pound finished the day on a slightly stronger note versus the US dollar, but the price action was really only part of a consolidation of GBPUSD between 1.7200 - 1.7350.

The Japanese yen declined from near a three- year high against the euro and pared gains versus the dollar on renewed risk appetite in the markets. A drop in money-market rates encouraged investors to resume purchases of higher-yielding assets funded by low-cost loans in Japan.

The Canadian dollar was slightly higher versus the US dollar on Thursday morning, rallying back after it dropped to a key technical level during the overnight session.

An easing of risk aversion on the back of early strength in equity markets helped the Australian dollar higher in Asia Friday, but a slew of risk events await offshore. The local unit remains vulnerable to the whim of global mood swings, and faces an immediate threat from top tier housing and consumer sentiment data scheduled for release in the U.S., analysts said.

Market expectation

Cable recovered in late Asia, lifting back above USD1.7300 to currently trade around USD1.7335/40. Traders note that stops are positioned on a break of USD1.7355 (a lot of banks have minor stops here), which if triggered seen opening a move on toward USD1.7380/85. Bids remain in place back at USD1.7285/80.

EURUSD demand into late Asia lifted it on to USD1.3510 before slipping back to USD1.3460. Recovery from here so far fails to break back above USD1.3500. Offers seen placed between USD1.3490/00, a break above to open a move on toward USD1.3510 ahead of stronger level at USD1.3525. Bids are placed at USD1.3460 ahead of USD1.3425/20. Stops noted below this latter level, a break to open a deeper move toward USD1.3400 with stronger demand expected to reemerge around USD1.3385/80.

Some analysts do not expect the dollar's weakness to last. "The USD and JPY will strengthen further on recession fears (and) global deleveraging," said strategists.

The euro is mixed in narrow ranges Friday, as dealers look to sell into any strength.

On Friday, analysts will keep an eye out for a raft of second-tier U.S. data, starting with September housing starts and building permits. That will be followed by an October report on consumer sentiment from the University of Michigan and Reuters.

Most important events of the day