Daily Forex Overview

Previous session overview

On Thursday, the dollar eked out a modest gain versus the euro and hit new four-week highs against the yen, underpinned by fluctuating shifts in global risk sentiment.

The euro has lately been undermined by weak euro-zone data and economic turmoil in Eastern Europe, but came under renewed selling pressure when the ECB, as expected, left its key policy rate at 2.00%, while the Bank of England slashed its key rate to a new record low 1.00%.

The single currency rebounded briefly from USD1.2760 to around USD1.2892 in U.S. morning on cross buying in euro versus the Japanese yen before falling later in the day.

British pound rallied after Bank of England cut borrowing costs by 50 basis points to a record low of 1 percent to kick off growth. With no hint of quantitative easing in the UK, and a surprise rise in UK house prices in January, the sterling gained sharply.

The Japanese yen ended the day sharply lower as a rise in risk appetite lifted carry trades and equities, with the DJIA up 1.34 percent at 8,063.07. USDJPY traded with a low of JPY89.23 and a high of JPY92.24 before closing the day around JPY91.15.

The Canadian dollar is trading near USD1.2300. The currency remains volatile as investors continue to shy away from riskier investments.

Firmer regional equity markets pushed the Australian dollar sharply higher in Asia Friday, though analysts cautioned the improved mood could reverse if U.S. employment data due later is weaker than expected. The Australian dollar was quoted at USD0.6521, up from USD0.6441 late Thursday. Against the Japanese yen, it was at JPY59.24 from JPY57.575.

Market expectation

The euro Friday is retaining a mild downward bias amid concerns about the euro-zone outlook.

EURUSD squeezed to a low of USD1.2748 in early Europe, breaking below Thursday's lows at USD1.2760, with traders noting that this level got support in that session from a semi official name. Talk Thursday placed stops below USD1.2740, a break of which would bring area between USD1.2710/00 into view. Demand in this area said linked to protection of the base of USD1.27/1.37 don't option structure, expiry Feb13. Rate has corrected off the lows, currently trading around USD1.2775 after meeting resistance on the approach to USD1.2780.

Cable offers seen placed at USD1.4700/10 with stops above USD1.4720. If stops triggered seen opening a move on toward USD1.4750/60 ahead of USD1.4800. Support USD1.4590/80, USD1.4550 ahead of USD1.4530/20.

EURGBP most technical analysts appear to have the area between stg0.8660/50 in view, with early demand for sterling able to break rate under Thursday's lows at stg0.8733, through stg0.8700 and on to an early low of stg0.8685. Support seen at stg0.8685/80 ahead of that mentioned tech support/target area. Resistance now seen placed at stg0.8750/60, with interim resistance emerging between stg0.8730/35.

Players' attention is on now U.S. non-farm payrolls data due later in the global day. Depending on how markets react to the data, the dollar may target JPY95 over the next couple of weeks, dealers added.

Dealers say the greenback may resume its rise, possibly to JPY95, as sentiment toward the U.S. unit recovers partly thanks to the positive response to measures proposed by the administration of U.S. President Barack Obama, including an idea to create a vehicle to buy toxic assets from financial firms.

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