Daily Forex Overview

Previous session overview

On Monday, the dollar coasted to a lead against the euro as dollar demand remained intact at the start of a new month.

The European Commission said Monday that the euro-zone economy entered recession in the third quarter of this year and will remain at a standstill for most of 2009.

The euro fell sharply against the yen and the dollar Tuesday in Asia after a bigger-than-expected rate cut by the Australian central bank spawned speculation that the European Central Bank may take stronger easing steps. The euro stood at JPY123.98 to the yen and at USD1.2567 to the dollar compared with JPY125.35 and USD1.2645 respectively overnight in New York.

The British pound plunged throughout the day on Monday, and support at 1.5800/12 may not be able to hold the currency back from further declines as the long-term trend remains very much in favor of GBPUSD weakness.

USDJPY saw some brief nervous selling in early NY, from 99.20 to 98.40, but returned to the 99.00 area.

A larger-than-expected interest rate cut by the Reserve Bank of Australia and an accompanying bearish outlook for world growth sent the Australian dollar tumbling Tuesday, with further losses expected during offshore trading.

Market expectation

The euro and dollar are lower against the yen Tuesday, while the euro also loses ground against the greenback. More losses against the yen may occur after traders hit some resistance.

Dollar-yen trades back around JPY98.95 into early European dealing, bids noted in the JPY98.35/30 area with short-term stops below. On the topside, light offers come in at JPY99.00/20, with a break set to expose a move towards Monday's highs in the JPY99.60/65 area.

A strong bounce from the lows in late Asia took euro-dollar back on to a USD1.26 handle, holding around USD1.2610 into early European dealing. Offers are at USD1.2640/50 in small, with light order boards still noted and poor liquidity continuing to exacerbate moves. A break back to the downside would bring last month's lows back into the spotlight in USD1.2330 area.

The market is preparing for the European Central Bank and Bank of England monetary policy meetings on Thursday, when both are expected to cut interest rates after the Fed did the same last week. The ECB is believed to cut its policy rate by 50 basis points to 3.25%, while the BOE by the same margin to 4.00%.

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