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Daily Forex Overview

Mon, Jun 29 2009, 08:14 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

The dollar rose against the yen and euro in Asia Monday, after comments from China Sunday suggested the country would not change its policy of keeping the greenback as its key foreign reserve currency for now.

The markets took the remarks as a sign that the dollar will likely keep its role as a major reserve currency, prompting short-term investors and hedge funds to buy the U.S. unit, dealers said.

On Friday, the PBOC issued a report that mentioned the need to create a new reserve currency, raising concerns in the market that China would shift out of dollar assets sooner than expected.

The U.S. unit climbed more than a third of a yen to JPY95.59 from its level in New York Friday, before ceding some of its gains.

The euro reaped the benefits of the weakening USD as investors flee the safe-haven currencies. The euro climbed over 1%, heading toward a two-week high of USD1.4139 hit earlier this week.

Cable surged fm USD1.6375 to USD1.6498 in European opening with traders cited short-covering ahead of weekend and the pair received another boost after the release of U.S. data. Sterling rose to as high as USD1.6564 and ended at USD1.6521.

The Canadian dollar broke out of its range against the U.S. currency, boosted by firm commodity prices and a revival in investors' thirst for assets perceived to be riskier.

Profit taking and a modest slip in risk appetite weighed on the Australian dollar in late Asian trade Monday, although the currency has held close to the psychologically key USD0.80 mark.

Market expectation

Traders have been moving to sell the euro in a thin market Monday, with dealers in Singapore saying that sovereign names were spotted selling the euro.

Some dealers are looking to buy the euro off its lows, however, while major currency pairs revolve in narrow ranges. The dollar and euro are slightly higher against the yen, while the U.K. pound is mixed.

Looking forward, the greenback may move in a JPY94.80-JPY97.00 range before Thursday's U.S. June non-farm payrolls index, a closely watched indicator of the health of the U.S. economy, traders said.

Ahead of the data, yen-selling pressure from Japanese mutual funds for portfolio adjustment may offset exporters' yen-buying to close accounts at the end of June, the traders said.

For EURUSD support now seen at USD1.3980/70 (USD1.3976 61.8% USD1.3887/1.4119), a break below to expose stops, which if triggered to allow for a deeper move toward USD1.3945/40. Resistance remains in place at USD1.4040/50.

Trader's notes that cable has found support at USD1.6443 and level corresponding to a 61.8% retracement of the move up from USD1.6368 to USD1.6564. Support remains in place to USD1.6435 with stops below USD1.6430, with next support interest now seen at USD1.6415, with interest extending toward USD1.6400.

Most important events of the day

Published on  Mon, Jun 29 2009, 08:17 GMT