Daily Forex Overview

Previous session overview

The euro continued to rise against the dollar and yen in Asia Thursday as the region's investors became more optimistic toward the European economy after recent data, and more risk tolerant on higher crude oil prices.

One indicator boosting bullishness toward the euro-zone was this week's German ZEW data, which measures sentiment among European financial analysts. The headline figure came to 44.8, much better than the consensus forecast of 37.0.

The recent rise in crude oil prices is also lifting the euro by whetting investors' risk appetite, and prompting more purchases of euro-denominated risk assets, traders said. The euro's been considered a higher risk currency than its U.S. and Japanese counterparts recently, and it has benefitted when the market's risk tolerance increased.

Asian traders were also talking Thursday about the currency market effect of the planned JPY923 billion shares offering by Sumitomo Mitsui Financial Group Inc., Japan's third-largest bank by assets.

The euro remains supported by a weaker US dollar. Yesterday, the euro benefited from upbeat German think tank ZEW economic sentiment index, which rose to 44.8 in June, the highest level since May 2006. The news added optimism that the euro zone will recover later this year.

The Pound dropped versus the U.S. currency in European session as stocks slipped. Despite a brief but sharp rise after U.K. claimant count in May came in better than expected, sterling tumbled from USD1.6483 to an intra-day low of USD1.6220 against the dollar. However, the pound was able to stage a strong rebound in tandem with euro in New York session partly due to the low U.S. inflation data and short-covering.

The Australian dollar was weaker in the Asian session late Thursday as the currency ran into significant resistance at the USD0.80 level on the back of a continued decline in global equities markets.

Market expectation

The euro and other major currencies are trading narrowly on Thursday in movements lacking discernible patterns.

Some players think the euro may keep rising because it looks like the European economy is stronger than they anticipated a few weeks ago.

EURUSD currently trades around USD1.3950. Talk in the market that USD1.3800/1.4000 structure is in play (would think that if there is one the base side might be more likely to be at USD1.3750 or USD1.3700 considering recent option plays/bid info) and helping to restrict recent trading ranges. Offers remain in place from around USD1.3985 through to USD1.4000, a break above to open a move on toward USD1.4015/20 ahead of USD1.4040/50. Support USD1.3920, minor interest toward USD1.3900 ahead of USD1.3885/80 and USD1.3860.

For Pound bids remain in place between USD1.6345/35, a break to allow for a deeper move toward USD1.6300 ahead of USD1.6280/70. Offers noted between USD1.6415/25, a break to open a move toward USD1.6450.

Some said the yen might rise against the dollar on factor, as non-Japanese investors buy the Japanese currency to acquire the bank's new shares. Payments for the public offering are due June 22.

European stocks are expected to open largely flat Thursday, as investors digest news surrounding the banking sector on both sides of the Atlantic.

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