Daily Forex Overview

Previous session overview

On Monday, the dollar and the euro fell against the yen as a decline in U.S. stock markets reversed a temporary bout of optimism that originated from the news of the Chinese fiscal stimulus plan.

EUR returned above 1.2900 but slid back to 1.2750 in the US session. ECB head Trichet said in an interview that he couldn't rule out a rate cut at the December review.

Like the euro, the British pound surged higher during the start of trading on Sunday, only to tumble throughout the New York trading session toward near-term support at 1.56.

The Japanese Yen was moved by equities and initially sold across the board as crosses surged higher on the China news. USDJPY traded with a low of 97.63 and a high of 99.47 before closing the day around 98.00.

Shorter dated Australian interest rate futures rocketed to record levels in Asia Tuesday, helped by weaker regional equities, while the Australian dollar weakened.

Market expectation

Into the European session main focus will be centered on the ZEW survey to be released. Small bids now noted into USD1.2700, more at USD1.2675/55 with stops under USD1.2650.

The euro is stalled Tuesday, and the rally in EURUSD has lost momentum, with the pair now caught in a range below 1.300, said several strategists. Some put secondary resistance at 1.2928, support at 1.2651, then 1.2525. A break outside this range will likely trigger renewed momentum, but more data or events are needed to convince the market to move outside these ranges.

For USDJPY light stops noted under JPY97.50 with a clean break then exposing a move towards last week's lows in the JPY96.80 area. Offers back at JPY98.30, stronger into JPY98.50 with stops above.

AUDUSD correction above 0.7000 would be hard to sustain as pair consolidates in current range. Analysts say at best, AUDUSD could make dash for 0.7480 but this would provide fresh selling opportunity. Tips tentative 0.65-0.70 range for now but move below 0.65 would put 0.60 back in view.

Most important events of the day