Daily Forex Overview

Previous session overview

The US dollar generally ended Tuesday down against the majors, though the currency did manage to eke out some gains versus the Japanese yen and British pound.

The euro traded near a three-month high against the yen and rose versus the dollar in Asia Wednesday, as the announcement of fresh Bank of Japan steps to support growth underpinned demand for risky currencies. The Japanese central bank said it will lift its monthly purchasing amounts of government bonds to JPY1.8 trillion from JPY1.4 trillion to ease financing conditions in the marketplace.

The positive sentiment had pushed the euro higher against the dollar and the pair rose above USD1.3000 for the second straight day, trading up 0.4 percent at USD1.3016 in late New York session. Later in the session US equities resumed their uptrend and this helped EURUSD to regain the USD1.30 barrier. EURUSD closed the session at USD1.3017, compared to USD1.2968.

On Tuesday, USDJPY extended its gradual rebound. The drivers were the same as during previous trading sessions. An overall constructive stock market sentiment, buying in other yen cross rates and some yen caution ahead of the BOJ meeting all kept the Japanese currency in the defensive.

The Sterling traded under USD1.4000 briefly as the markets sold the pound on news in the Financial Times that the UK may lose another 1 Million jobs.

The Australian dollar was marginally softer against its U.S. counterpart in late Asian trade, still benefitting from the better mood on Wall Street but somewhat range bound ahead of the Federal Open Market Committee's policy meeting later Wednesday.

Market expectation

The euro gained against the dollar and yen on Wednesday after the Bank of Japan said it will boost purchases of government debt.

European trade takes EURUSD on to a fresh high of USD1.3066. Strong selling emerged as rate approached recent recovery highs at USD1.3070, dropping the rate back to current level around USD1.3020. Support seen placed at USD1.3020/15, stronger toward USD1.3000. A break below this latter level can allow for a deeper move toward USD1.2985/80 ahead of USD1.2965/60. Resistance noted at USD1.3055/60, stronger toward USD1.3070/80. More at USD1.3095/00.

EURGBP moves above stg0.9300, though momentum so far not too convincing, trader's comment, as it struggles to extend move to stg0.9305. If rate can clear higher then is expected to meet next band of resistance at stg0.9320.

Pound breaks and clears below USD1.4030, with momentum able to take it on to challenge next band of support seen placed to USD1.3990. A break here and it brings Tuesday's lows at USD1.3965 back into view.

Traders are awaiting word on whether the Fed will go ahead and buy Treasurys. Most aren't expecting policy makers to start this process of quantitative easing just yet. Nevertheless, traders didn't appear willing to take on much risk.

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