Daily Forex Overview

Previous session overview

U.S. Dollar Trading gained during the day as hedge fund sales of long NZD, AUD positions helped the Dollar. A sharp reversal in US stocks put the USD on the back foot with the EURO regaining the 1.5000 level. Weekly Jobless Claims at 531k vs. 515k previously. In US Stocks, DJIA +131 points closing at 10081, S&P +11 points closing at 1092 and NASDAQ +14 points closing at 2165.

The Japanese yen slid against the US dollar as concerns mount over weaker Japanese exports given the strength of the yen.

The euro rose to a more-than two-month high of JPY137.83 in Asia on Friday as stronger regional share markets prompted hedge funds and other short-term players to buy the risk-sensitive unit.

EURUSD opened Asia around USD1.5030, off NY late recovery highs of USD1.5040 seen as market reacted to the rally on Wall Street. Rate initially struggled to move above USD1.5030 in early trade before strong demand emerged ahead of the Tokyo fix that was able to take it through recent highs at USD1.5047, triggering the reported barrier at USD1.5050 before running into decent supply above USD1.5060 from an Asian sovereign that capped the move at USD1.5061. Rate eased lower after the fix, the rate finding initial support at USD1.5025/20 before extending the pullback to USD1.5012 ahead of the European open.

Sterling fell against the US dollar and euro after UK retail sales data undershot expectations for a 0.5 percent increase, while the annual rise of 2.4 percent was below forecasts of a 2.8 percent increase. Adding to pressure on the pound was a Bank of England policymaker who said the central bank could extend quantitative easing if necessary.

The high-yielding, risk-sensitive Australian dollar rose against the yen, breaking JPY85.00 for the first time in more than a year. Demand grew for the resource-linked Aussie on the view that further rises in oil prices presaged more gains in the broader commodity market, dealers said. December crude futures rose 47 cents to USD81.66 per barrel, nearing a one-year high at USD82.00.

Market expectation

For Pound bids seen placed between USD1.6625/20, more between USD1.6610/00, a break here to allow for a deeper move toward USD1.6585/80. Offers remain in place to USD1.6680, a break to open a move toward USD1.6700 with key area seen between USD1.6730/40 (USD1.6728 76.4% USD1.7044/1.5708; USD1.6731 1.618% swing of USD1.6638/1.6487 retracement; USD1.6742 Sep 11 high) Focus on UK GDP data 0830GMT.

EURJPY retaining a buoyant tone into the European session just off overnight JPY137.83 highs, with traders noting the rally has so far stalled just shy of the August 13 peak at JPY137.85. A break through stops at JPY138.00/05 would expose the August 7 high at JPY138.72, channel resistance projected from the October lows then eyed at JPY138.87.

If equities in Europe and the U.S. also rally later, the common currency could end the week even higher, possibly reaching a four-month high of JPY139.00, dealers said.

The German Ifo business sentiment index for October, due at 0800 GMT, may rise to 96.2 from 95.7 in September, according to a Dow Jones Newswires poll. Players will also be watching the 0830 GMT release of the U.K.'s July-September gross domestic product, tipped up 0.1% on quarter. That would be the first such rise since the first quarter of 2008, likely supporting share markets to the benefit of the euro as well as the British pound, dealers said.

European stocks are expected to open higher Friday following Thursday's triple-digit gain for the Dow Jones Industrials Average, which rallied strongly on a round of better-than-expected earnings.

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