Daily Forex Overview

Previous session overview

The yen weakened slightly against the dollar and euro in Asia Friday as higher regional share markets prompted players to trim their holdings of the safe-haven Japanese unit.

Japan's benchmark Nikkei 225 Stock Average was up 1.6% in early afternoon trade, as other Asian stock prices also rose.

The Euro bounced well off lows in Europe to finish in a bullish mood. Support close to USD1.3500 discouraged attempts lower and strong stocks sent the pair higher again. A lot of comments from ECB members overnight failed to move the market.

Sterling weakened against the dollar after the Bank of England gave a cautious assessment of the UK economy's recovery prospects. BOE Governor Mervyn King stated that though there were signs the pace of decline was starting to ease, the recovery would be slow and highly uncertain.

The Australian dollar was slightly firmer in late Asian trade Friday, helped higher by a very modest gain in global equities markets and general risk sentiment. But the domestic currency remains capped by some very significant historic and technical levels that need to be broken for a more sustained rally.

Market expectation

The euro - along with the pound - is little changed Friday as investors pause to assess its next move. Analysts say the euro is facing some major resistance levels and they expect a period of consolidation around the euro's current exchange rates.

Players who earlier in the week had expected that lower stock prices would further push up the yen took the stronger share prices as a cue to revise their yen-bullish views, dealers said.

But despite upbeat share markets, dealers said lingering anxiety, particularly over U.S. and European economic indicators later in the day, were likely to limit the greenback's and euro's upside against the yen.

EURUSD continues to trade with a heavy feel, with some of the weight seen from yen euro-yen. Support noted toward USD1.3580 (61.8% USD1.3526/1.3667), a break here to open a deeper move toward USD1.3560/50, where stronger demand is seen placed.

EURJPY heavy tone in euro-dollar sees the cross extending lows under JPY130.00 now, with slippage extending to JPY129.81 at writing. Light interest noted on the downside ahead of bids at JPY129.00/128.90. Technical analysts note the cross is holding under the 200-day moving average, with the 21-day giving way here at JPY129.99.

Cable support seen placed toward USD1.5200, a break below to open a deeper move toward USD1.5180 ahead of USD1.5150. Resistance remains toward USD1.5250 ahead of USD1.5280.

Economists in a survey expect the Euro zone GDP to log a record-sharp 2.2% on-quarter fall.

Dealers also said doubts over the dollar's strength would likely linger due to concerns over the long-term fiscal health of the U.S., highlighted earlier in the week by a Financial Times opinion piece arguing that the country is at risk of losing its AAA credit rating.

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