Daily Forex Overview

Previous session overview

The euro fell to a two-week low against the yen in Asia Monday, as continued weakness in Chinese stocks and newly confirmed falls in Japanese capital investment prompted investors to sell risk-sensitive currencies.

The European unit fell to as low as JPY133.62, its lowest level since July 30, from JPY134.53 in New York Friday. The dollar also fell to JPY94.46 from JPY94.83.

Currency dealers have recently been paying attention to moves in Chinese stock prices, with the benchmark Shanghai Composite Index falling by more than 3% at one point earlier Monday.

The euro dollar pair dropped recording a low of USD1.4143 and a high of USD1.4194, having the union currency trading around USD1.4155. The pair is having a support at USD1.4125 along with a resistance at USD1.4185. If the pair breached the support level the next target will be USD1.4100.

The British pound is trading steady on chopping trading conditions. The sterling was recently hurt by a jump in UK unemployment rate and as the Bank of England indicated that rates will not be raised for some time.

The Australian dollar was weaker late Monday as the unwinding of gains in risk asset markets continued into the Asian session. The pullback in risk appetite in what is typically a volatile month for equities markets has supported Australian bonds futures, pushing the September three-year bond futures back above 95.00.

Market expectation

The euro and the dollar may extend losses against the yen as Friday's lukewarm U.S. economic data add to concern that economic recovery may take more time, say analysts.

Continued risk aversion sales, prompted by the release Friday of weaker than expected US consumer confidence data, saw EURUSD pressure reported stops below USD1.4130, with eventual break extending the base to USD1.4126 before profit take demand surfaced to provide an early cushion. However, recovery remains shallow. Support noted between USD1.4120/15, more toward USD1.4100 ahead of Aug 12 low at USD1.4086. Resistance remains toward USD1.4200.

European stocks are expected to open in the red, with Friday's weak session on Wall Street set to weigh on sentiment despite news Monday that the world's second-largest economy, Japan, pulled itself out of recession in the year's second quarter.

The dollar and euro will likely keep falling this week because investors are expected to decrease their exposure to risk-sensitive assets, said analysts. They said the greenback may fall to JPY93.00 this week.

While the U.K. pound is lower against the dollar and yen, some traders are touting a chance to go long at around current levels or slightly lower, with tight stop-loss points. The pound, meanwhile, is little changed against the euro.

For Pound support seen placed at USD1.6390 gives way at writing, extending lows to USD1.6380. Below here and rate can ease on toward USD1.6350 ahead of USD1.6338 (Jul 30 lows). Resistance now seen placed at USD1.6450.

Most important events of the day