Daily Forex Overview

Previous session overview

The euro edged up slightly against the dollar and yen in Tokyo Thursday as Asian players scooped up the unit to take advantage of its overnight fall in New York.

But dealers said the risk-sensitive currency could resume its decline if global share markets remain weak later in the day.

In the early Thursday trade, players bargain-hunted the euro after its overnight slide to its lowest levels against the dollar and yen in two weeks and one week, respectively. The cheap euro was particularly attractive for their month-end book-keeping purposes, dealers said.

The Euro was a large mover with a relief rally in Asia being sold for the rest of the day for a test of USD1.4000 which held firm. The fall from USD1.4300 has been brutal for longs and could induce more selling on rallies as longs try to bailout. Investor sentiment was key in getting the Euro higher so if stocks fall then that support may slip.

The British pound fell against the greenback as a 5% drop in the Shanghai stock market prompted investors to shy away from riskier assets. In addition, official data showed that British financial institutions lent less money to households last month than at any time in the past 15 years. Cable slid to as low as USD1.6346 in European morning before rebounding.

The Australian dollar dragged itself higher in Asian trade Thursday and could enjoy further gains offshore if stock markets tick higher while bond futures continue to suffer from an ever improving economic outlook.

Market expectation

The euro is getting some buying interest around the USD1.4000 level Thursday and would find even more long-position interest below that level, although traders are looking to take quick profit on any up move.

Meanwhile, the pound is seeing some speculative shorting against the dollar from around USD1.6400, with nearby targets eyed for profit-taking and tight upside stops.

European stock markets are expected to open higher Thursday as investors react with confidence amid emerging signs the global recession is coming to an end and as the region's earnings season gains momentum.

EURUSD eased off highs ahead of the European open, picking up a fresh bid tone into early Europe with early market able to extend highs to USD1.4075. Traders mention that option linked offers seen placed between USD1.4080/90, with one adding that the USD1.4085 level holds the strike of a decent sized expiry for today's 1400GMT cut. Above this area and rate can push toward USD1.4120/25. Support remains between USD1.4010/00, a break to open a deeper move toward USD1.3965/60.

For the rest of the week dealers said players will be watching Asian share markets after China's Shanghai Composite Index on Wednesday closed down 5% from the previous day's closing price, its largest fall since mid-November.

Most important events of the day