Daily Forex Overview

Previous session overview

The dollar briefly rose to a two-month high against the euro in Asia Wednesday because growing concerns over major European banks prompted investors to flee the single currency.

Players said it is difficult to buy the Japanese currency now because of the nation's severe economic downturn and political turmoil. On Monday, government data showed the Japanese economy contracted by 12.7% at an annualized pace during the October-December period.

The EURUSD pair broke below key support at USD1.2700 on Tuesday morning, suggesting the pair could target the 2008 lows of USD1.2329 as signs of distress in the Euro-zone continue to emerge.

The British pound was actually one of the stronger currencies in the forex markets on Tuesday, slipping only against the greenback, as the latest inflation data suggests that the Bank of England may be hesitant to slash rates to zero in the near-term.

The Japanese Yen had a very interesting trading on Tuesday losing ground against the USD which has become the preferred safe haven currency but managing to gain against nearly all the others.

Fears of a banking meltdown in Europe, and a still negative outlook for the global economy dominated sentiment towards high yielding currencies in Asia Wednesday, sending the Australian dollar lower while bond futures soared.

Market expectation

Risk aversion is keeping the euro under pressure against the dollar and euro on Wednesday, and strategists expected the euro to soon revisit its October lows of USD1.2330.

The greenback, a safe-haven currency, may have entered an upward trend, dealers said. Investors' needs for such currencies are increasing because rating agencies recently warned about the exposure of major European banks to emerging markets.

Early EURUSD demand in Europe has pushed rate up to USD12628, but reported resistance/sell interest placed between USD1.2630/60 so far remains untouched. Bank of Korea intervened in the won overnight, though amounts said not to be too large, but may prompt some book balancing supply of euro-dollar from this party, traders suggested. Offers remain between USD1.2630/60. Bids toward USD1.2550 with further demand interest said to extend down to USD1.2510, with stops mixed in on a break of USD1.2545.

Rate currently trades around USD1.4277. Offers seen placed from USD1.4300 through to USD1.4320 (USD1.4314 Tuesday high), a break above can open a move on toward USD1.4350 ahead of USD1.4380. Support noted at USD1.4255/50, more toward USD1.4240 with stops below.

USDJPY pushing to fresh highs for the day now, though as yet offers placed around Tuesday's peak at JPY92.70/75 remain untested. Supply said to strengthen into JPY93.00 barrier interest with stops through JPY93.10.

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