Daily Forex Overview

Previous session overview

On Thursday, the euro and other currencies gained against the dollar as traders resumed riskier positions with encouragement from a stronger-than-expected euro-zone Purchasing Managers Index.

The dollar dropped below JPY97 against the yen for the first time in more than three weeks in Asia Friday after more negative news on the U.S. auto industry prompted players to sell the U.S. unit.

The Wall Street Journal reported early Friday Tokyo time that automaker Chrysler LLC may be forced to file for Chapter 11 bankruptcy as early as next week, which fanned fears that further chaos in Detroit may prolong the U.S. recession.

As players sold the dollar for the yen, which they consider an even safer haven asset, on the news, the greenback slid to JPY96.98, its lowest level since March 30.

The Euro traded higher for the 4th day breaking above USD1.3100 as Equities rallied and EU PMI's beat estimates. Manufacturing PMI jumped to 36.7 vs. 33.9. Services jumped to 43.1 vs. 40.9 previously. The euro rallied and rose to session highs of USD1.3162.

The Pound opened higher at USD1.4563 and slid to a morning low of USD1.4507 against the higher DX. As the equity markets attracted more risk-taking, traders exited the DX, supporting higher foreign markets and sending Sterling to a day-session Hi of USD1.4698, before drifting lower towards the close to end the day at USD1.4694, up 191 tics.

The Japanese Yen weakened against most of the crosses although the USDJPY failed to rally as the USD weakness intensified. Japan cut its 2009/10 growth to -3.3%. Positive stocks help sentiment.

The Australian dollar was firmer late Friday, helped by a modestly positive U.S. equities performance despite some emerging jitters about the state of U.S. banks. While Asian equities markets failed to follow the stronger Wall Street lead, higher-yielding currencies such as the Australian dollar managed to hold onto their gains, bolstered by a broader-based view that risk sentiment is unlikely to collapse any time in the medium-term.

Market expectation

The euro is little changed against the dollar, but the pound is under pressure on a Daily Telegraph report that ratings agencies have voiced concerns about the U.K.'s vast public debt burden.

Pound recovers back but again seen meeting resistance around the USD1.4685 level. A break here can open a move back toward USD1.4700 ahead of USD1.4720. Failure can allow rate to sink back toward USD1.4645/35.

Euro-sterling begins to ease off highs at writing, as cable moves up to retest overnight recovery cap at USD1.4685, currently trading around stg0.8975. Support seen placed at stg0.8950, more between stg0.8940/30 ahead of stg0.8910/00. Resistance seen placed at stg0.8990/00 ahead of stg0.9020/25 and stg0.9050/60.

USDJPY extending the day's lows as stops are triggered under the late Asian base at JPY96.90, with slippage so far stretching down to JPY96.71. Light bids noted into JPY96.50. Stronger into JPY96.00/95.90. Technical analysts see support at JPY95.97 (38.2% retracement of this year's rally).

Players said that they didn't expect any currency market-moving statements from a meeting of finance heads from the Group of Seven most industrialized economies in Washington, DC, later in the global day.

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