Daily Forex Overview

Previous session overview

On Friday, the dollar got off to strong start in 2009, surging to a three-week high against the yen as U.S. equities rallied on the New Year's first day of trading.

The greenback advanced more modestly against the euro and several other rivals.

The Euro lost ground as it fell off the 1.4000 handle and support from crosses dissipated. The Euro zone PMI, reflecting contracting activity for the seventh month, settled to an unseen low of 33.9 last month.

The British pound has spent most of the past month or so falling toward support at 1.4400, as the markets anticipate that the Bank of England will continue cutting rates aggressively.

Rising oil and commodity prices favored riskier assets and hurt the yen.

The Canadian dollar remained in a tight trading pattern in holiday trading.

The Australian dollar hit a two-and-a-half month high in Asia Monday as New Year trade ushered in a wave of optimism in high-yield asset markets. Australian dollar was quoted at USD0.7114, up from USD0.6971 late Friday. It hit an intraday peak of USD0.7160, its highest level since mid-October.

Market expectation

The euro is slightly lower against the dollar and yen Monday, with selling by Japan's exporters and institutional players, according to the dealers. The traders predict a euro range of JPY127.50-JPY128.50 and USD1.3800-USD1.3930 for the rest of the trading day.

EURUSD adding to earlier bid levels, Asian traders note demand interest trailing from USD1.3840 through to USD1.3805, while a NY traders from Friday reports stops placed on a break of USD1.3830. Further stops noted below USD1.3770. Rate currently trades around USD1.3930.

Early European pressure on the dollar allowed cable to extend its recovery, the rate able to push above the earlier Asian highs and on to USD1.4578 before momentum faltered. Rate currently trades around USD1.4550/55. BOE rate decision Thursday to be the main focus with most expecting another cut of up to 100bps. Cable offers USD1.4580, a break to open a move on toward USD1.4620 ahead of USD1.4650. Support USD1.4510/00, a break to open a deeper move toward USD1.4485/80 ahead of USD1.4450/40.

Most important events of the day