Daily Forex Overview

Previous session overview

The euro rose slightly against the yen and dollar in quiet Asian trading Friday as regional stocks ticked up, encouraging speculators to buy back riskier currencies such as the European unit.

But traders shrugged off the single currency's gains, saying they were too small to be meaningful and that most currency players were staying on the sidelines ahead of the weekend.

During the Asian session, some investors took a cue from rising Asian stocks to buy the euro against the less risky but lower-yielding yen and dollar, traders said.

The European currency climbed a third of a yen to JPY134.55 from New York overnight, while gaining a third of a cent to USD1.3921.

On Thursday, EURUSD held an almost perfect sideways trading range between USD1.3900 and USD1.4000, at least during the European trading hours. The better than expected Philly Fed survey pushed stocks higher and EURUSD tested offers in the USD1.40 area. However, there was no follow through price action. EURUSD gradually had to cede its initial gains and the move even accelerated later in the session despite stocks holding up rather well. The pair dropped temporary below the USD1.39 mark.

The British pound fell against the dollar and hit a one-week low against the euro, after data showed UK retail sales unexpectedly fell, raising doubts about economic recovery. The sterling had surged recently on expectations the UK economy would quickly emerge from its deepest recession in decades. UK retail sales fell 0.6% in May, against a forecast of a 0.4% gain. That left them 1.6% lower than last May.

The Canadian dollar edged higher against the U.S. dollar after domestic inflation data showed annual inflation slowed in May but was still higher than market expectations.

The Australian dollar enjoyed a fillip in Asia Friday, helped by an improved risk appetite and weaker U.S. dollar, while interest rate futures plunged on rising oversupply concerns.

Market expectation

The euro is slightly higher against the dollar, yen and pound on Friday as markets see a slight up-tick in willingness to build exposure to risk.

Dealers said the major currency pairs are showing some flows into risk exposure after surprisingly strong U.S. economic news raised hopes that recovery may be taking root in America.

The single currency's near-term outlook rests on events next week such as a planned two-day Federal Open Market Committee meeting starting on Tuesday and the release of U.S. economic data, dealers said.

If U.S. data come in weaker than expected, boosting demand for safe currencies like the dollar and the yen, the European unit could fall to JPY130.00 and USD1.3700 in the near-term, dealers noted. The euro is indeed vulnerable to profit-taking because many players have overbought euros during recent months, some dealers said.

For EURUSD traders reported that decent offers seen placed toward USD1.3950 (USD1.3952 61.8% USD1.4002/1.3872), which helped to cap. Rate currently trades around USD1.3940. Stops noted through USD1.3955, which if triggered opens a move toward USD1.3970/75 ahead of stronger area above USD1.4000. Support seen at USD1.3910/00, a break below to open a deeper move back toward overnight Asian lows at USD1.3883 with bids noted from this level extending toward the NY base at USD1.3872. Stops seen placed on a break of USD1.3870.

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