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Daily Forex Overview

Fri, Jul 31 2009, 07:31 GMT
by Raivis Zile

Dukascopy Swiss FX Group  |  View company's profile

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Previous session overview

The euro rose against the dollar and yen in Tokyo Friday as higher regional share markets prompted players to buy the risk-sensitive common currency, though dealers said its gains would likely be limited as players hesitate to make big bets ahead of the weekend.

The stronger equities calmed some investors' nerves frayed earlier in the week by the sharpest fall in Chinese stocks since November. The euro and other higher-yielding, riskier currencies were the winners in this environment, while the safe-haven yen looked least attractive, dealers said.

The dollar was down slightly against the yen, trading hands at JPY95.34 at 0450 GMT compared with JPY95.50 late Thursday in New York. Dealers said selling orders from Japanese exporters for month-end settlements were likely to keep a lid on any rises during Tokyo trade, with resistance around JPY95.60.

Euro rebounded strongly against the dollar to as high as USD1.4096 on Thursday from a two-week low of USD1.4007 formed in the previous day as a surge in global stock markets encouraged investors to be more risk-aggressive. In addition, German unemployment unexpectedly dropped in July by 6,000 and jobless rate was steady at 8.3 percent, investors shrugged off the news as it was largely due to one-off effects, as stated by the German Labour Office.

The British pound rose against the dollar as a report showed British house prices climbed in July for a third month, which suggests improvements in the economy.

A better risk tone and firmer regional equities helped the Australian dollar climb higher in Asian trade Friday ahead of a slew of top-tier domestic data and fresh central bank growth forecasts scheduled for release next week.

Market expectation

Fresh demand into early Europe lifts EURUSD back to retest overnight highs, extending to USD1.4140 at writing, as market adjusts positions on expectation of dollar sales at end month fixings. Offers seen placed from around USD1.4150 through to USD1.4160, a break here to open a move toward USD1.4180 ahead of stronger area between USD1.4195/00. Bids seen placed at USD1.4120, more toward USD1.4100.

Sterling expected to be a main beneficiary of end month fix interest (along with Aussie and Cad). Offers now seen placed toward USD1.6585, with further interest noted from this level to USD1.6600. Support seen placed at USD1.6525/20, USD1.6485/80. US Q2 GDP data will be in focus this afternoon for determining risk positions into the weekend.

Topping the agenda will be retail sales and employment numbers, along with the Reserve Bank of Australia's monthly board meeting and their quarterly statement on monetary policy.

European stock markets are expected to open just a tad lower Friday amid caution as the focus lies squarely on economic data, and in particular the U.S. second quarter GDP release, and what these indicate about the economic slowdown.

But dealers said even if share markets in Europe and the U.S. gain later, the euro is unlikely to surpass the multi-month highs it hit earlier in the week, as players are hesitant to make big bets into the weekend.

Players will be watching the U.S. second quarter gross domestic product figure due at 1230 GMT for cues on the health of the world's largest economy. Economists surveyed on average expect the data to show the economy contracted by 1.5% in annualized terms in the April-June period.

Dealers said any weaker-than-expected result could benefit the safe-haven yen. But some traders said any effects may be muted, as many players focus on more forward-looking data.

Most important events of the day

Published on  Fri, Jul 31 2009, 07:58 GMT

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