Daily Forex Overview

Previous session overview

The US dollar and Japanese yen ended the day mostly lower on Thursday after sharp declines during the European trading session, but it was clear that risk appetite in the forex markets was on edge during US trading.

EUR rose to 1.2760 on stimulus hopes, but faded to 1.2670 on a lack of specifics from Merkel, and ECB comments (Bini Smaghi) that the zone shouldn't use currency weakness to gain economic advantage.

The British pound rose from 1.4213 to 1.4449 before retreating to end the day at 1.4292 after the bearish comments. Bank of England Deputy Governor John Gieve said there is a risk of Britain entering the kind of downturn Japan witnessed for a decade but it is by no means inevitable as policymakers have taken action.

The yen continued to weaken against the dollar as investors are worried about the Japanese economy. The Japanese economy shrank 3.3% in the last quarter, which is its deepest contraction in more than three decades.

Broad based concerns for the state of the global economy, weaker regional equities and resulting repatriation flows into the U.S. dollar sent the Australian dollar lower in Asia Friday, as traders braced for further losses offshore.

Market expectation

The euro is lower against the U.S. dollar and yen Friday.

EURUSD recovers back toward USD1.2600, after rate touched an early low of USD1.2565; despite traders noting a euro-dollar sell recommendation from UBS based on euro zone growth fears. Bids remain in place at USD1.2565, more toward USD1.2550 ahead of stronger area between USD1.2515/00. Resistance seen placed at USD1.2600, more toward USD1.2615/20.

Pound resting on reported support at USD1.4205 with Asian traders noting stops positioned on a break below USD1.4200. If stops triggered then seen opening a deeper move toward USD1.4180/70 area (USD1.4179 76.4% USD1.4095/1.4449). Below here and rate can sink toward USD1.4150. Resistance seen placed at USD1.4300.

EURGBP trade in Asia was contained within a range of stg0.8846/79 with rate so far respecting those parameters into early European dealing, though favoring the lower end. Rate currently trades around stg0.8852. Support seen placed at stg0.8840, a break below to open a deeper move toward stg0.8805/00. Resistance now seen placed atstg0.8880/90.

Friday will see the release of Japan's all industry index, German services and manufacturing PMI, U.K. retail sales, U.S. CPI and real earnings.

Most important events of the day