Daily Forex Overview

Previous session overview

The dollar retook some lost ground against most major counterparts after touching new lows in Asian trading Monday.

Dollar was buying JPY94.68, down from JPY94.80 in late North American trading on Friday.

The euro rose to a two-month high against the dollar in Asia Monday, as falling U.S. long-term interest rates and concerns over U.S. consumer spending weighed on the greenback.

The euro rose as high as USD1.4310 during the Asian session, its highest level since June 3, but soon gave up those gains as non-Japanese investors took profits.

On Friday euro strengthened against the greenback to an intra-day high of USD1.4280 as upbeat U.S. Chicago PMI data encouraged investors to become more risk-aggressive. Earlier, euro zone unemployment rate in June rose to a 10-year high of 9.4% in June compared to consensus expectations of 9.7%, while July inflation came in -0.6% versus economists' forecasts of -0.4%.

The British pound initially weakened against the dollar as investors fled to the safe haven dollar, but recouped most of those losses after stronger than expected US economic data.

The Australian dollar fell back from the fresh 10-month highs it set in early Asia Monday, although it remained well above Friday's close buoyed by a weaker U.S. dollar and bullish equity and commodity markets.

Market expectation

The euro is lower against the yen and dollar as players lined up with short positions after it hit a two-month high of USD1.4310 earlier on improved risk appetite. But those shorts, based on tight technical targets, could be covered later in the session.

European stock markets are expected to open marginally higher Monday, as investors approach what is expected to be a hectic week with continued bullish enthusiasm.

Early sales into Europe saw market targeting reported CTA stops between USD1.4225/15, but demand to USD1.4225 able to counter. Rate currently trades back around USD1.4250. Bids remain in place to USD1.4225 with those stops between USD1.4225/15 below. A break here can open a deeper move toward USD1.4200/1.4195, with more stops through USD1.4190. Resistance seen placed at USD1.4280, stronger between USD1.4300/10.

Pound found support just under USD1.6710, the rate able to bounce back before meeting resistance around USD1.6750. Rate settled into a basic USD1.6700/50 range ahead of Europe, currently trading around USD1.6730. Resistance remains in place at USD1.6750/55, stronger toward USD1.6780. Further offers noted toward USD1.6800 with reported stops above. Support remains in place toward USD1.6700, stop placed on a break of USD1.6690/85. Next support seen placed at USD1.6660/50 ahead of USD1.6625/20.

Players will now turn their attention to July's manufacturing index from the U.S. Institute for Supply Management, due at 1400 GMT Monday. Survey of economists forecasts the figure to come in at 46.5, which would be an improvement from June's 44.8.

But some players are hoping for a negative surprise, dealers said.

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