Daily Forex Overview

Previous session overview

The euro fell against the dollar in Asia Thursday as falling Shanghai stock prices made players avert risk-sensitive assets such as the single currency, but it could resume rising later in the day amid the continued bullish sentiment toward the unit.

The Shanghai Composite Index, China's benchmark on share markets, fell more than 3% at one point during Thursday's session. That prompted currency players to sell the euro, which tends to weaken when stock prices fall and risk appetite decreases.

The dollar rose to JPY95.07 from JPY94.96 and may climb further due to a lack of yen-supportive factors for now, dealers said. Players may try to push the dollar above JPY96 - a cap the greenback hasn't been able to breach for the last month, dealers added.

Euro rose to as high as USD1.4448 against the dollar after Goldman Sachs raised its U.S. real growth forecast in late New York afternoon. Investors were also still optimistic about a global recovery and were focusing on the slower pace of U.S. job losses in July compared to June. Earlier, euro traded as low as USD1.4355 after the weaker-than-expected U.S. economic data.

The British pound hit its highest level against the dollar since mid-October as it continued to benefit from earlier upbeat data on UK services sector activity and industrial production.

The Australian dollar was stronger in late Asian trade Thursday as comments from the Chinese central bank offset earlier gains made after surprisingly robust domestic jobs data.

Market expectation

European stock markets are expected to open higher Thursday, with investors in a positive mood ahead of key monthly rate-setting meetings by the Bank of England and the European Central Bank.

Equity markets pared losses in afternoon trade, led by Nikkei's rise, with the Shanghai index edging to -1.4% from lows of 3.5%, allowing euro-dollar to edge back toward opening levels. Bids remain in place at USD1.4385/80, a break below USD1.4375 to expose Wednesday's lows at USD1.4355, with bids noted between USD1.4355/45. Resistance noted between USD1.4410/15 (recovery high USD1.4412), with stronger interest noted between USD1.4425/35 ahead of USD1.4450.

Pound fell back to USD1.6957 before meeting demand on the dip, recovering back to USD1.7014 as equity markets pared losses during the Tokyo afternoon as the Nikkei rallied to fresh 10 month highs. Technical traders note that 76.4% retracement plays have been working well overnight. Resistance remains toward USD1.7015, more at USD1.7030 ahead of a suggested barrier at USD1.7050. Support seen placed at USD1.6970 ahead of USD1.6955/50.

Analysts said the Australian dollar is likely to be well bid as European trade gathers pace but will likely face strong selling on any rallies into the USD0.8500 level.

Market participants are awaiting the Reserve Bank of Australia's August quarterly statement on monetary policy and U.S. Department of Labor's July non-farm payrolls, both due Friday.

The Bank of England and the European Central Bank both conclude regular policy meetings later in the day, with both widely expected to stand pay on interest rates.

Signs the British economy could pull out of recession by the end of the year are feeding expectations that the central bank will put its 125 billion pounds (USD211 billion) asset-purchase program on hold, instead of extending the quantitative easing.

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