Daily Forex Overview

Previous session overview

On Thursday, the euro declined against the dollar after a sharp fall in U.S. stocks and a smaller-than-expected rate cut by the European Central Bank.

The euro fell against the dollar after the European Central Bank cut interest rates by 50 basis points to 3.25% and signaled that more cuts were possible. EURUSD traded with a low of 1.2678 and a high of 1.2930 before closing the day at 1.2720.

Bank of England (BOE) unexpectedly slashed rates by 150 basis points to bring the UK Bank Rate down to 3.00 percent, the lowest level since 1955 and biggest official interest rate cut since 1981. Indeed, a Bloomberg News poll of economists had only forecasted a 50 basis point reduction, making this move all the more shocking.

With US stocks closing deep in negative territory, USDJPY and the yen crosses were under pressure into early Asian dealing. USDJPY had closed in NY around JPY97.70, slipping down to JPY97.00 initially, with a US names said to have been a major EURJPY sellers. A slight bounce in USDJPY topped out at JPY97.20, with the rate then slipping back on to a JPY96 handle, hitting session lows at JPY96.75. A recovery in Dow futures allowed the rate to regain some lost ground later in the Asian day, pushing back above JPY97.00, with early European dealing seeing the pair retesting the JPY97.77 highs.

The Canadian dollar weakened against the dollar today as crude oil prices fell below USD64 a barrel.

The Australian dollar closed little changed Friday after overcoming early weakness. However, the mood in currency markets was cautious ahead of what many fear will be disastrous U.S employment data, confirming an acceleration in layoffs in the world's biggest economy.

Market expectation

The yen is giving up earlier gains against the euro and dollar Friday, as risk aversion dissolved with a rebound in Asian stock markets. However, caution prevailed ahead of what some investors worry will be a nasty U.S. labor report Friday.

For USDJPY light offers noted in the JPY97.80 area, more at JPY98.40/50, while on the downside, bids are at JPY96.70/50 with short-term stops below. Technical analysts note the 38.2% retracement of the October-November upswing was breached overnight at JPY96.90, adding the 50% retracement comes in at JPY95.78. A negative tone is evident as the rate trades below the daily moving averages, the 5-day now seen as resistance at JPY98.40.

For EURUSD bids now reported from USD1.2620 down to USD1.2590, with short-term stops said to come in below USD1.2650. Light offers noted at USD1.2790/1.2800.

Economists and investors expect the most-widely watched U.S. payrolls to decrease by 200,000 in October and the unemployment rate to rise to a five-year high of 6.3%.

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