Daily Forex Overview

Previous session overview

A wave of fresh risk buying washed across currency and bond markets after the Fed announced it will buy up to USD300 billion in Treasury's.

Stocks also rallied and it was the perfect storm for the Euro outpacing other currencies.

The single currency rallied and posted its biggest one-day gain versus the dollar since its 1999 inception. EURUSD traded with a low of USD1.2988 and a high of USD1.3534 before closing the day at USD1.3480.

Pound was under heavy selling pressure early in the European session breaking below USD1.4000 as UK data continued to disappoint. February Claimant count change jumped to 134K vs. 84.5K. MPC minutes showed 9-0 vote to cut although concern about setting rates too low could mean further cuts are unlikely. The FOMC trumped all other considerations and Cable surged to 1.43.

The dollar fell to as low as JPY95.66 versus Japanese yen before stabilizing and last traded down 2.5 percent at around JPY96.20.

The Canadian dollar was generally weak against most of the majors, but the currency was able to make headway versus the US dollar as USDCAD broke below key trend line support.

The Australian dollar rocketed higher in Asia Thursday, leaping to its highest level since Feb. 9 as the U.S. dollar crumbled following the Federal Reserve's move to begin buying Treasury bonds.

Market expectation

The euro is slightly lower on Thursday, coming off earlier gains as Asian stocks falter.

Risk appetite initially sent the euro to a three-month high against the Japanese yen and to its best level against the U.S. dollar since Jan. 9, though those early moves have since faded.

Some expected the U.S. dollar to stay under pressure, falling also against the Australian dollar, the British pound and emerging market currencies like the Korean won.

Traders now reporting good interest to buy the dip into USD1.3400, mainly coming from system accounts looking to chase the rally, with euro-dollar holding around USD1.3400 into European dealing. Technical analysts are noting the clean break of the 100-day moving average, seeing next resistance as the 50% retracement of the sell-off from December to March at USD1.3590.

The greenback continues to give back ground against the yen, with the pair hitting a fresh session low at JPY95.36 as stops were triggered on breaks of JPY95.80 and JPY95.50. Light bids are seen below at JPY95.20, with further stops below JPY95.00.

Analysts said the Australian dollar will likely thrive as risk aversion goes out the window near term, but cooler heads may prevail when the Fed's historic move is fully considered.

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