Daily Forex Overview

Previous session overview

The euro recovered slightly in Asia Thursday after short-term-focused players sold the greenback against the common currency to adjust positions on the back of rising concerns over U.S. debt.

The euro gained against the greenback due also in part to bargain shopping, dealers said, after marking a near three-month low of USD1.2513 Wednesday in New York.

The euro's modest gains against the dollar came also as the initial enthusiasm for the bigger-than-expected U.S. housing bailout, unveiled Thursday by U.S. President Barack Obama, ceded to concerns among some players over the ballooning U.S. debt.

The Euro continued to test the USD1.2500 level but the lack of fresh news helped that support to hold firm and range trading emerged.

The British pound softened after Bank of England's February 5 meeting minutes showed that the committee unanimously considered alternative policy measures, such as buying U.K. debt as part of quantitative easing to get its economy out of a recession.

As mentioned in the US dollar section, the Japanese yen ended Wednesday broadly lower, signaling at least a slight improvement in sentiment.

The Australian dollar was strong in Asia late Thursday, taking its lead from a rebound in regional stock indexes, while continuing reports that Chinese firms are seeking significant stakes in Australian miners also buoyed the currency.

Market expectation

The euro is off early lows after large falls in recent days due to concerns about the euro-zone economy and the fragility of Eastern European banks. Now, the market has turned its attention to short-covering on concerns over the effectiveness and timing of the U.S. housing bailout, said a forex dealer at a major Japan trust bank.

Sterling retains an underlying firm tone into early Europe, with cable lifting above overnight highs at USD1.4285 and looking set to challenge stronger resistance in the area between USD1.4300/20. Euro-sterling also reflects the pound's stronger tone, easing below the Asian base at stg0.88115 (Asia range stg0.88115/0.8833) and looking set to retest NY lows at stg0.8797. Bids seen placed to stg0.8795, with stops on a break of stg0.8790. If stops triggered seen opening a deeper move toward stg0.8780/75 ahead of stg0.8755/50. Cable breaks above USD1.4300 at writing, while euro-sterling eases under stg0.8795.

EURUSD currently trades around USD1.2578. Bids USD1.2520/00, ahead of the mentioned barrier, with demand linked to a major Asian account. Further demand noted between USD1.2490/80, stronger at USD1.2465/50. Resistance toward USD1.2600, with main sell interest said to be placed from USD1.2625 through to USD1.2660, with large stops on a break of USD1.2670.

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