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Daily Forex Overview

Wed, Jan 7 2009, 08:27 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Tuesday, the euro continued its retreat against the dollar and the U.K. pound as investors speculated about a rate cut from the European Central Bank.

The euro fell sharply across the majors on Tuesday as Euro-zone CPI estimates plunged more than expected to a 2-year low of 1.6 percent in December from 2.1 percent. EURUSD extended the rebound that started earlier in US trading and closed the session at 1.3536, still almost one big figure lower compared to the 1.3635 close on Monday evening.

The British pound weakened briefly to 1.4503 and then rose strongly to 1.4994 on active cross buying.

The Japanese Yen was sold aggressively against most currencies as the uptrend continued to be tested on the USDJPY. The pair temporary traded above the 93.91 resistance level, but a sustained break didn't occur and USDJPY closed the session at 93.65, little changed from the 93.44 close on Monday.

As oil and gas goes, so goes the Canadian dollar, surging on news that oil production will be cut and oil prices soared 5%.

Continued improvement in global financial markets pushed the Australian dollar to a fresh three month high in Asian trade Wednesday. The Australian dollar was quoted at USD0.7211, up from USD0.7121 late Tuesday. In early Asian trade, it hit a peak of USD0.7267, its highest level since Oct. 6.

Market expectation

EURUSD - Getting from directions that a major Asian account cited for the recovery back in euro-dollar. Rate pushes up to USD1.3564 (European high Tuesday), where it meets supply, a break above here expected to open a move on toward USD1.3580 (76.4% USD1.3660/1.3312). Rate currently correcting away from posted recovery highs, trades around USD1.3545. Support noted at USD1.3540, more at USD1.3525/20 ahead of stronger level at USD1.3500.

Several analytics say that recent rally of the EUR's should be the end. The single currency should fall hard now that it is apparent that the euro zone is not immune to the global slowdown after all.

While euro-dollar slipped back under USD1.3500, but recovery in the euro lifts euro-sterling back to stg0.9055/60, though cable seen retaining an underlying firm tone. Cable offers USD1.4940/50, a break to open a move back toward USD1.4990/00. Support USD1.4900 (50% USD1.4862/1.4940), a break below can open a deeper move toward USD1.4880 ahead of USD1.4860/50.

The reaction of the British pound may depend on what sort of bias is reflected in the Monetary Policy Committee's subsequent statement, and as we saw with the December 4 rate cut by the BOE, the currency could actually rise following a rate cut.

Most important events of the day

Published on  Wed, Jan 7 2009, 08:30 GMT