Daily Forex Overview

Previous session overview

The euro fell against the dollar and the yen in Asia on Thursday as a report in the Wall Street Journal encouraged views that Greece's fiscal problem could spread to other parts of Europe, prodding hedge funds to sell the risk-sensitive currency.

Citing Italy's Audit Court, the WSJ said late Wednesday that derivative contracts taken out by Italian municipalities could threaten local public finances for decades.

That shifted investor focus to debt issues in Italy, as well as to other places in Europe, including Portugal and Spain, dealers said. The euro has more room to extend losses, especially if any news related to its fiscal problems emerges, they added.

Also, behind the euro's fall was the International Monetary Fund's remarks overnight that it will sell its remaining 191.3 metric tons of gold on the open market, prompting purchases of the U.S. dollar against the commodity-linked Australian dollar and the risk-sensitive euro, dealers said.

The Bank of Japan kept its key interest rate on hold at 0.1% Thursday by unanimous vote as widely expected, maintained its overall economic view, and didn't issue any new policy initiatives Thursday. It repeated its pledge to do all it could to pull Japan out of deflation.

The U.S. unit declined to JPY90.94 from JPY91.20 in New York late Wednesday, mainly due to selling of the euro versus the yen, which involves sales of dollars for yen in the process, dealers said.

The Euro came under heavy selling pressure in Europe and in the US session as the relief rally stalled and the USD strengthened across the board. Concerns about Greece still linger and the Euro will struggle to maintain gains whilst this issue remains in focus.

The British pound fell from yesterday's highs after jobless claims were out much higher than expected - currently at 23.5k versus -15.2k at the previous month and -10.0k as projected. GDP posted a 0.1 percent gain this quarter.

The Australian dollar drifted lower Thursday in a quiet Asia session, knocked by a firmer U.S. dollar and news the International Monetary Fund is planning further sales of its gold reserves.

Market expectation

EURUSD squeezing lower again, the rate reverses off its early recovery highs at USD1.3593 to challenge reported demand to USD1.3550. Finds some support here but underlying pressure now takes rate through with area between USD1.3535/30 seen as the next target (USD1.3532 Feb 12 low). Model stops said to be placed on a break of USD1.3530, which if triggered to expose the USD1.3500 level, which still has exotic option interest linked to it.

EURGBP with cable reluctantly tracking euro-dollar slippage it sees euro-sterling resting back on overnight lows at stg0.8664, but traders have suggested that decent Asian demand lurks here and is currently providing support. Bid interest is seen dotted down to stg0.8655, a break to allow for a deeper move toward stg0.8635/30. Resistance seen placed at stg0.8680.

For Pound support now seen placed between USD1.5610/00 (USD1.5611 Feb 15 low), a break below to open a deeper move toward USD1.5580. Rate currently trades around USD1.5623.

European stocks are expected to open marginally higher Thursday, following a positive close on Wall Street, with the oil majors likely to be boosted by climbing oil futures. Firm economic data and the latest earnings releases are also helping the tone.

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