Daily Forex Overview

Previous session overview

Traders mostly followed momentum and stocks Monday, and largely ignored the Federal Reserve's announcement of new currency swap arrangements with the Bank of England, European Central Bank, Bank of Japan and Swiss National Bank. The agreements allow the Fed to receive euro, yen, sterling and Swiss francs through Oct. 30, should the need arise, to provide liquidity in those currencies to U.S. financial firms.

On Monday, the EURUSD currency pair mirrored the change in sentiment that was visible in almost all other markets. In Asia and early in European trading, it looked as if global markets would continue to build on the positive investor sentiment that was visible at the end of last week. This also supported EURUSD and the pair was traded above the USD1.3550 mark at the start of trading in Europe. EURUSD closed the session at USD1.3416, compared to USD1.3486 on Friday.

The Pound a successful HSBC bank rights issue underpinned the GBP but heavy Euro losses eventually dragged the pair lower.

The yen regained some ground against the dollar and the euro in Asia Tuesday on demand from Japanese exporters as well as speculators' buying of safe-haven currencies driven by fragile Asian stocks.

The Australian dollar was weaker late Tuesday, pulled down by a breather in the recent global improvement in risk appetite but the currency remains supported by expectations that the Reserve Bank of Australia's latest rate cut may be one of its last in the current cycle. The Reserve Bank of Australia cut the cash rate a quarter of a percentage point to 3.0% Tuesday but failed to give any overwhelming indication it might cut rates further in the near-term.

Market expectation

The slight reversal in stock markets is leading to moderately lower rates in the euro Tuesday. But traders caution against any big bets in either direction for now, pending earnings season results. Narrow ranges are likely.

European stocks are expected to open marginally higher Tuesday as investors pause to measure worries over the financial system and the broader economy against the upcoming earnings season.

EURUSD currently trades around USD1.3365. Offers remain in place to USD1.3385, a break above to open a move on toward USD1.3400 (76.4% USD1.3425/1.3321), with offers noted from here, extending toward USD1.3410. Stops seen placed above, which if triggered opens a move on toward USD1.3425. Support seen placed at USD1.3320, a break below to allow for a deeper move toward USD1.3300/1.3290 (USD1.3293 61.8% USD1.3114/1.3582).

For pound offers seen placed between USD1.4700/10, with stops above, a break to open a move on toward USD1.4720/25 ahead of USD1.4745/50. Support remains at USD1.4650, a break to allow for a retest on the overnight low of USD1.4638 (USD1.4635 38.2% USD1.4110/1.4960) ahead of USD1.4620-00.

Most important events of the day