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Daily Forex Overview

Tue, Nov 3 2009, 09:11 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

The dollar dipped Tuesday in Asia after the International Monetary Fund made a big gold sale to India, but the U.S. currency rebounded as Australia's central bank signaled it may pause its monetary tightening next month.

The moves were mostly modest in thin trade as Japanese markets were closed for a national holiday.

The euro and gold gained at the dollar's expense as news that the IMF sold 200 metric tons of gold to the Reserve Bank of India stoked expectations that central banks, especially in Asia, will continue to shift away from their reliance on the U.S. currency.

But the buck got a lift against the Australian dollar, as well as the euro, when the Reserve Bank of Australia after raising rates by a quarter percentage point for a second month in a row, as expected said the tightening "will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead."

The EURUSD tested below USD1.4700 in Asia but rebounded well as stocks lifted off lows and China's PMI at 55 showed manufacturing expanded at the fastest pace in 18 months. The rally continued on similar data in the US before stocks once again came under pressure and pushed the Euro lower.

The GBPUSD was pressured at the start of the European session as the market focused on proposed UK bank breakup plan and potential for the BOE to expand QE by up to 50bn pounds more on Thursday. October PMI Manufacturing at 53.7 vs. 50.1 forecast.

The Australian dollar was weaker late Tuesday in Asia after the central bank lifted interest rates an expected 25 basis points but signaled it could pause its tightening cycle in December.

Market expectation

The dollar is mixed against the euro, yen and pound on Tuesday, as investors grapple with how much more risk to take on before key central banks meet this week.

Analysts said the dollar selling that has greeted recent encouraging data, such as Monday's U.S. ISM index and last week's third-quarter U.S. gross domestic product growth figures, indicates a resilient appetite for risk that should favor the euro and other currencies against the dollar.

For EURUSD bids seen placed to USD1.4750, with traders noting further, minor, buy interest dotted down to USD1.4720. Below here and rate can ease on toward USD1.4700 ahead of stronger support at USD1.4680. Stops said to be building below USD1.4675. Offers remain in place between USD1.4810/20, a break to open a move toward USD1.4845/60. Above here and USD1.4920 moves into view.

EURJPY knocked under JPY133.00 in early European dealing, though as yet slippage is contained ahead of the Cloud base at JPY132.78. A break below required for fresh downside momentum. Key support still seen placed as the 200-day moving average down at JPY131.03.

Most important events of the day

Published on  Tue, Nov 3 2009, 12:28 GMT