Daily Forex Overview

Previous session overview

The euro fell against the yen and dollar in Asia Tuesday as anemic Asian share markets encouraged short-term players to sell the risk-sensitive common currency.

The dollar was also down against the yen, trading hands at JPY88.90 compared with JPY89.02 late Monday. Selling by Japanese exporters in the morning session in Tokyo weighed on the U.S. unit, traders said.

At 0450 GMT, the euro was down at JPY132.88 from JPY133.22 late Monday in New York. Against the dollar, the common currency stood at USD1.4950 compared with USD1.4964.

The Euro rallied hard yesterday from the open as stocks and gold gained in Asia. PMI data in Europe was strong with November manufacturing at 51 and Services at 53.2. EURJPY gained over 1 yen to above JPY133 as US stocks extended gains to fresh year highs.

The Sterling rallied hard from below USD1.6500 as shorts from last week covered positions and GBPJPY led a strong rebound. EURGBP struggled to fall below 0.9000 however as the Euro was also broadly strong.

The Australian dollar nudged higher in a lackluster session Tuesday, although the unit gave up some of the gains won in New York as local equity market losses damped demand for riskier assets.

Market expectation

USDJPY ticking lower through the European session, bringing reported demand at JPY88.60/50 into play, placed around Monday's lows. Note large expiry interest at JPY88.50 may serve to contain price action. Stops noted underneath and through JPY88.10, ahead of barriers at JPY88.00.

Pound is getting a lift to USD1.6540 on reported Asian account demand (also seen in euro-dollar). Cable currently trades around USD1.6543, off early European lows of USD1.6519. Resistance noted at USD1.6550 ahead of USD1.6570/80.

European stocks are expected to open lower Tuesday, with traders looking to take some cash off the table after Monday's strong gains while trying to gauge the outlook for the global economy.

The euro may retreat further later in the global day if European equities are similarly sluggish, dealers said. A weaker than expected result in the German Ifo business survey may also weigh on the unit, they said.

If the German Ifo business climate indicator for November, due at 0900 GMT, falls short of the expected rise to 97.3, from 96.8 in October, the euro may fall further, dealers said.

For the rest of the week, a major driver of the greenbacks moves against its Japanese rival will be U.S. interest rates, said analysts. If demand is strong at a 5-year Treasury auction later in the global day, pushing yields down, the dollar could fall to JPY88.00, they said.

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