Daily Forex Overview

Previous session overview

The dollar declined against the yen and euro in Asia Thursday as players sold the U.S. unit to lock in profits after its overnight rise.

Players also sold the dollar in reaction to news that Russia and Brazil are planning to reduce their U.S. Treasury holdings in favor of new International Monetary Fund securities, dealers said.

Japanese short-term players and exporters sold the dollar for the yen, while overseas funds sold it for the euro, dealers said.

A rise in long-term U.S. interest rates lifted the dollar overnight, setting it up for a slight fall-back during Asian hours.

Dealers said there were no prominent trading cues, though Japanese exporters' dollar-selling orders around JPY98 were weighing on the unit.

Some traders also mentioned the continued rise in oil prices as a dollar-negative factor. The price of Nymex crude futures rose above USD72 per barrel for the first time since October.

EUR managed modest further gains during early London to USD1.4145, appearing to shrug off an FT story on German banks, but spent the rest of the session declining to USD1.3915 on the broad-based USD rally. Fitch warned of rising risk of devaluation in Latvia, and Sweden's FSA said its banks could weather Baltic credit risk.

The sterling extended its gains against the USD, rising nearly 1%, as Russia's comments weighed on the USD. Sterling's sharp gains against the dollar also helped it hit its highest level in 2009 versus the euro as it extended earlier gains reflecting the belief that the economy is over the worst of the recession.

The Australian dollar climbed strongly Thursday as better-than-expected employment data for May prompted investors to further lower expectations of a near-term interest rate cut.

Market expectation

The euro and pound are gaining against the dollar Thursday, but dealers are cautioning that a consolidation may be in the works.

The euro/dollar pair appears to have settled into a trading range, some analysts said.

For EURUSD offers seen placed toward the mentioned overnight high at USD1.4063, a break above USD1.4065 to open a move toward USD1.4090/00. Stops noted through USD1.4110, which if triggered to open a move toward USD1.4130 ahead of USD1.4140/50. Support seen at USD1.4025/20, stronger toward USD1.4000 with stops placed on a break of USD1.3990.

Release Wednesday of UK manufacturing data seen supporting view that UK economy is stabilizing at a quicker pace than the euro zone and provides an underlying buoyant tone toward the pound. Bids remain in place toward USD1.6380, more toward USD1.6350/40 with stops below. Resistance USD1.6420/25 ahead of USD1.6440/50 and Wednesday's high at USD1.6475.

Players are now watching U.S. May retail and food sales, due at 1230 GMT, to gauge conditions in consumer demand. Economists surveyed forecast a 0.5% rise. Some dealers said a weaker-than-expected showing could further drag on the greenback.

European stocks are expected to open marginally higher Thursday, with oil and mining stocks again set to benefit from the surge in commodity prices, but doubts remain about the sustainability of this rally.

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