Daily Forex Overview

Previous session overview

On Friday, the U.S. dollar fell sharply in volatile trading as investors booked profits on the greenback's gains earlier in the week.

The dollar's decline was more technical than fundamental. The reversal began when the euro dipped to USD1.2650, a key technical level at which many traders and hedge funds had orders to buy the single currency.

EURUSD rallied from 1.2557 to 1.2885 after triggering stops in a thin U.S. session on rumors that the Chairman of euro zone finance ministers Jean-Claude Juncker has proposed that the common euro zone bond should cover the first 40% of the overall euro zone government debt.

The British pound gained on Friday after UK retail sales figures showed another rise in spending during the month of January amidst heavy discounting.

The Japanese Yen found strength as the USDJPY crashed lower on banking concerns and fresh stock weakness. Crosses were well supported by their respective majors.

The Canadian dollar weakened after news that Canadian consumer prices surprisingly fell 0.3 percent in January, opening the door for another 50 basis point cut to 0.50 percent on March 3.

The Australian dollar enjoyed a bounce in Asia Monday, buoyed by a Wall Street Journal story that banking giant Citigroup may receive further aid from the U.S. government.

Market expectation

The euro shot higher on the Citigroup report, with U.S. hedge funds selling the U.S. dollar, likely on the view that increased U.S. government ownership of banks highlighted the relative weakness of U.S. banks to their global counterparts.

EUR rising, as European names buy EUR for increasing risk appetite, says dealers. Says WSJ's report that U.S. government may take up to 40% shares of Citi adds to speculation that bank at least won't go out of business, therefore positive for players' risk appetite. EURUSD last USD1.2977 may rise to USD1.31. EURJPY last JPY120.72 may rise to JPY121.50.

Resistance seen on the approach to USD1.3000 with stops now reported on a break above. Further sell interest now reported between USD1.3015/20 with more stops above.

GBPUSD dropped back to USD1.4480 ahead of the European open, as spec longs pared back, but renewed demand into early Europe has extended the move to USD1.4590 at writing. Offers seen placed to USD1.4600/10, more from around USD1.4635 through to USD1.4650. Support USD1.4555/40, more toward USD1.4500 ahead of USD1.4480.

EURJPY - offers in the JPY120.50 area now cleared as euro-dollar also extends the highs. Next area of supply come in at JPY122.00/20 with stops comes in above.

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