Daily Forex Overview

Previous session overview

On Friday, the dollar managed a partial recovery from a 13-year low against the yen, but exited active trading mostly down as investors pondered the fate of the U.S. auto industry.

Euro rose to a marginal high of 1.3416 on the back of the intra-day strong rebound in EURJPY before easing after traders took profits ahead of the weekend.

The British pound weakened against the dollar and continues to trade at record lows against a basket of currencies. The BOE has reduced rates 3 full percentage points since October and investors expect it to continue.

The Japanese yen held its own on Friday as lingering risk aversion sent the currency to 13 year highs against the US dollar overnight, as Japan announced an emergency economic package.

The Canadian dollar fell against the greenback for the first time in 3 days after the US Senate blocked the auto maker rescue plan.

Stronger regional equities and further weakness in the U.S. dollar sent the Australian dollar sharply higher in Asia Monday, with further gains expected offshore.

Market expectation

EURUSD renews 8-week high, touching 1.3500, as Asian speculators cover EURUSD short positions, European players buy for year-end settlements, says analysts; but significant rise above 1.3500 for rest of Tokyo trade unlikely as sell orders related to options triggered at that level.

EURUSD trading around USD1.3470, after touching a pullback low of USD1.3455. Bids seen placed around USD1.3460, with interest said to extend toward USD1.3440. A break below can open a deeper move toward USD1.3410/00. Offers remain ahead of a suggested barrier at USD1.3500.

USDJPY may again fall below 90.00 if Fed this week cuts more than 50 bps, says analysts; even if cut is 50 bps, if Fed makes dovish statement on U.S. economy, may push 2-, 10-year treasury yields lower, send USDJPY under 90.00 given correlation between yields and USDJPY.

Cable offers remain between USD1.5070/80, with further interest noted at USD1.5100/10 ahead of recent rally highs at USD1.5133. Bids placed at USD1.5005/1.4995, with stops below USD1.4990. Further demand USD1.4970 ahead of USD1.4950/40.

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