Daily Forex Overview

Previous session overview

On Thursday, the euro advanced to a one-week high against the dollar and a two-week high against the yen after the European Central Bank surprised with a smaller than expected rate cut and U.S. stocks rallied.

The EURUSD cross rate performed quite an impressive rebound on Thursday. There were two obvious drivers for this move. Firstly, stock markets worldwide re-corded strong gains and investor risk appetite is still an important driver for the single currency. On top of that, the ECB surprised the markets as it cut rates by only 25 ba-sis points to 1.25% while a reduction to 1.0% was largely expected. The pair closed the session at USD1.3461.

Sterling rose sharply on Thursday on optimism about the prospects for coordinated steps by Group of 20 leaders and solid UK house price data. The news pushed the pound over one and a half percent higher against the US dollar.

The dollar rose above JPY100 for the first time in five months Friday morning in Asia on buying by Japanese importers, but later fell back below that level with the help of Japanese exporters. While Japanese importers and some short-term focused investors were selling the yen for dollars and euros for regular settlement before the Tokyo fixing, the greenback broke through key psychological resistance at JPY100 to hit JPY100.17, its highest level against the yen since Nov. 4.

The Australian dollar hit a three month high in Asia Friday as a buoyant mood post the G20 summit bolstered risk appetite, though analysts cautioned the better mood could easily dissipate if U.S. nonfarm payrolls are worse than expected.

Market expectation

The euro is struggling on Friday as risk appetite fades with Wall Street futures declining slightly. But the euro-yen downside may be limited near term, as "there are risks that North Korea may launch a missile over the weekend," making people wary of holding too much yen, a trader said.

EURUSD eases back from recovery highs around USD1.3442 to USD1.3426, the rate meeting support around the 38.2% retrace of the recovery from USD1.3397 to that mentioned high. A break below here can open a deeper pullback toward USD1.3415/05. Offers seen placed from around USD1.3442 through to USD1.3450.

Pound edging back toward USD1.4700, with traders noting offers placed toward this level, adding that a break above to boost positive feel and open a move on toward USD1.4715/20 (USD1.4713 50% USD1.4775/1.4650, USD1.4720 61.8%), a break to allow for a move on toward USD1.4745/50 ahead of USD1.4775/80. Support remains at USD1.4650.

USDJPY - recovery from early European lows so far capped around JPY99.70, with traders not anticipating too much activity ahead of the US employment report. Offers said to come in at JPY99.80/90, with reports of further barrier interest at JPY100.45/55 and JPY100.65/75. Note also vanilla expiry interest at JPY100.00 for the NY cut.

Ahead of a closely watched U.S. non-farm payrolls report for March due at 1230 GMT, some players are particularly eager to lock in profits, analysts said, as a worse-than-expected result may push the dollar down against the safe-haven yen.

Most important events of the day