Previous session overview
On Tuesday, the dollar advanced sharply versus the euro and U.K. pound on economic fears across Europe and as U.S. stocks sank.
A U.K. banking sector bailout package, another ratings downgrade in the euro zone, negative headlines out of the Euro group meeting of finance ministers and lower equities all led traders to seek safety in the U.S. dollar.
The U.K. pound fell 4.1% from a session high of USD1.4440 to its lowest level in seven-and-a-half years, USD1.3865.
The single currency weakened versus the dollar from USD1.3104 to USD1.2855 on escalating concerns that more euro zone nations may face credit ratings downgrades, which overshadowed the release of better-than-expected German ZEW economic sentiment survey.
On Tuesday, USDJPY was rather well supported at the start of trading and the pair even returned to the 91 area early in Europe. However, renewed pressure on the stock markets and in particular on the financial sector blocked ascent of USDJPY and the yen came back in the drivers' seat. USDJPY closed the day near the intraday lows at 89.76.
The Australian dollar was weaker in Asia Wednesday, dragged down by big falls in equity markets, as the focus switches from President Barack Obama's inauguration to another round of expected bleak U.S. corporate earnings in coming days.
Market expectation
The euro is rebounding against the dollar and yen Wednesday due to short covering on the recent lows, dealers said. But downward pressure on the euro could again emerge in Europe later with possibility of more bad euro zone news.
EURUSD break below USD1.2920/10 area provided the impetus to extend the corrective pullback away from overnight recovery highs at USD1.3020 to USD1.2893. Rate currently trades around USD1.2910. Earlier reports placed support between USD1.2885/80 ahead of USD1.2850/40 (USD1.2845 Asia low). Resistance seen placed at USD1.2940/50.
EURGBP currently trades around stg0.9313. Resistance said to remain around stg0.9335, a break to open a move on toward stg0.9385/00, traders has suggested. Support seen placed at stg0.9290, more toward stg0.9270.
For GBPUSD support said to remain in place between USD1.3850/40, stronger between USD1.3815/00. A break below this latter area seen opening a potential technical move toward USD1.3686, traders suggest. Resistance seen placed USD1.3920, more between USD1.3940/60.
Traders being squeezed out of short positions pushed the Australian dollar from its lows, but U.S. corporate earnings should spark renewed selling of high yield currencies amongst investors, traders said.
Most important events of the day
| Date | Time:GMT | Currency | Indicator | Forecast | Prior |
| 1/21/2009 | 7:00 | EUR | German PPI m/m | -1.10% | -1.50% |
| 1/21/2009 | 8:00 | EUR | ECB President Trichet Speaks | ||
| 1/21/2009 | 9:00 | EUR | Italian Trade Balance | -1.75B | -0.07B |
| 1/21/2009 | 9:30 | EUR | ECB President Trichet Speaks | ||
| 1/21/2009 | 9:30 | GBP | Claimant Count Change | 82.0K | 75.7K |
| 1/21/2009 | 9:30 | GBP | MPC Meeting Minutes | 0-9-0 | 0-9-0 |
| 1/21/2009 | 9:30 | GBP | Average Earnings Index 3m/y | 3.30% | 3.30% |
| 1/21/2009 | 9:30 | GBP | Public Sector Net Borrowing | 10.8B | 16.0B |
| 1/21/2009 | 9:30 | GBP | Prelim M4 Money Supply m/m | 0.90% | 1.20% |
| 1/21/2009 | 9:30 | GBP | Unemployment Rate | 6.10% | 6.00% |
| 1/21/2009 | 9:45 | GBP | MPC Member Tucker Speaks | ||
| 1/21/2009 | 13:30 | CAD | Wholesale Sales m/m | -1.60% | -1.80% |
| 1/21/2009 | 15:00 | USD | FOMC Member Geithner Speaks | ||
| 1/21/2009 | 17:30 | CHF | Gov Board Member Hildebrand Speaks | ||
| 1/21/2009 | 18:00 | USD | NAHB Housing Market Index | 9 | 9 |
| 1/21/2009 | 22:30 | NZD | Business NZ Manufacturing Index | 35.4 | |
| 1/21/2009 | 23:50 | JPY | Trade Balance | -0.32T | -0.37T |
