Daily Forex Overview

Previous session overview

The dollar fell against the yen in Asia Wednesday as a slower-than-expected contraction in Japan's gross domestic product prompted investors to sell dollars to lock in profits. Stock price movements have been soft in Asia so far, also helping boost the Japanese currency, dealers said.

The yen usually benefits from falls in stock prices as they make players less willing to take risks and buy the safe-haven Japanese unit.

Elsewhere, the euro fell against the dollar and yen as stock price movements decreased players' risk appetite.

EUR moved a cent higher to USD1.3660 last night, the ZEW survey headline number stronger than expected, and Russia's central bank thought to be buying EUR; the Moscow Times reported the share of reserves in EUR has risen from 42.4% to 47.5%, largely at the expense of USD.

The Sterling broke to record highs above USD1.5500 as the market responded to the normalization of the financial markets. Banking health has helped the GBP more than most as London is a major financial hub. April CPI at 2.3% y/y vs. 2.4% forecast.

The Australian Dollar hit year highs after breaking above resistance at USD0.7735 to touch USD0.7785 before easing as Wall St. finished lower. RBA minutes released yesterday offered little new to future policy direction with the month by month approach now anticipated.

Market expectation

Players will now turn their attention to stock price movements because no economic indicators with a big market impact will be released in the U.S. and Europe for the rest of the global day.

Yet there is no big trend in the currency market, so the unit's future course will largely depend on share price actions later in the day.

Recovery in euro-yen back from lows of JPY129.70 above JPY130.00 allowed euro-dollar to edge back to USD1.3620 ahead of the European open. Another round of euro-yen sales into early Europe returns rates back toward overnight lows, euro-dollar currently trading around USD1.3590. Bids seen placed between USD1.3585/80, more between USD1.3560/50 with stops below. Further demand then said to be placed from around USD1.3530 through to USD1.3500. Resistance seen placed at USD1.3620, more above USD1.3650 through to USD1.3670.

Cable broke below the initial lows, extending the base to USD1.5452, with rate meeting decent demand on dips toward USD1.5450. Rate continued to bounce between USD1.5450/1.5500 into early Europe with good two way action noted. Bids remain in place around USD1.5450 (USD1.5449 76.4% USD1.5425/1.5525), with stronger interest noted between USD1.5425/20. Below here are next support seen at USD1.5400 ahead of USD1.5380. Offers remain in place toward USD1.5500, a break above to open a move toward USD1.5525 (NY high). Focus remains on the 200 day m/a, coming in today at USD1.5553. Traders note that this is the last major pair not to pierce their 200 day m/a.

European stocks are expected to open lower Wednesday, hit by a weak close on Wall Street Tuesday, as investors take a cautious stance after recent healthy gains.

Most important events of the day