Daily Forex Overview

Previous session overview

The U.S. dollar fell against the euro and the yen in Asia Monday, after a top U.S. Federal Reserve official said he would prefer to keep the central bank's asset-buying program active beyond its current cut-off date.

In an interview Federal Reserve Bank of St. Louis President James Bullard said an extension of the program which has been widely considered a negative factor for the dollar would give policymakers more flexibility as they seek to shepherd the economy toward recovery.

In comments that point to a reduction in euro-liquidity supply, Trichet said financial institutions "must act now to ensure that a future removal of central-bank support can be managed without painful withdrawal symptoms." He also pledged to unwind ECB stimulus for the euro zone economy in a timely and gradual fashion.

At 0513 GMT, the euro was trading at USD1.4941, up from USD1.4851 late Friday in New York trade.

Meanwhile, with Japanese markets closed for the Labor Thanksgiving Day, the dollar lost little ground against the yen and traded at JPY88.84 from JPY89.00. At the same time, the euro rose to JPY132.71 from JPY132.26.

The Euro tested the noted USD1.4800 support level before recovering late in the US session with stock markets also rising off lows. October German PPI was at 0.0% vs. 0.1% forecast. EURJPY came under increasing pressure as the technical picture continues to weaken testing 132 supports.

The British pound extended this week's descent and fell to a two-week low against the greenback on Friday as concerns over Britain's financial health increased. Sterling erased all of the gains made on Monday when cable hit a three-month high of USD1.6879.

The Australian dollar was broadly flat late in the Asia session on Monday in dull trade as Japanese markets were shut for a public holiday, with dealers awaiting fresh sentiment from offshore.

Market expectation

In foreign exchange markets, the euro is higher against the dollar and yen, with some traders saying the dollar may come under pressure on comments by Federal Reserve Bank of St. Louis President James Bullard that he would prefer to keep the central bank's asset buying program active beyond its current cut-off date.

The euro won't see enough support to breach the psychologically important USD1.50 level, said analysts. It's going to be very difficult (for the euro to get back above USD1.50) given some of the weakness on Wall Street and in some of the commodities markets, analysts said. The euro should trade between USD1.4725 and USD1.4950, while the dollar moves between JPY88.30 and JPY89.45, they said.

Euro-dollar rallied to a session high of USD1.4948 with ongoing demand into early Europe lifting it on to USD1.4959 (USD1.4966 76.4% USD1.5017/1.4800). A break above this area may open a move on toward USD1.4990/00 (USD1.4990 76.4% USD1.5049/1.4800). Above here and rate can extend toward USD1.5015/20 ahead of stronger interest in the USD1.5050/65 area. Support USD1.4920, more toward USD1.4900.

European stocks are set to open higher Monday, finding support from climbing commodity prices which drove mining, energy and raw material stocks higher in Asia overnight, despite some concerns about a lack of catalysts to stimulate the market this week.

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