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Trading Currency - A Summary

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Trading Currency − A Summary

Fri, Jul 3 2009, 15:58 GMT
by Anna Coulling

Master The Markets

Previous Currency Market Session Overview

The USD had a quiet overnight session with exceptionally light volumes in anticipation of the 4th July holiday weekend leaving only the European FX market active.  NFP data came in far worse than expected, -467k against a forecast of -325k taking the unemployment rate to 9.5% versus an expected 9.6% - a small crumb of comfort, I am sure.

The US Dollar and Japanese Yen have tended to trade in an inverse relationship to levels of risk appetite.  Both have tended to fall when equities rise as investors show a greater risk tolerance, but rise when investors exit riskier assets in the face of economic uncertainty or financial turmoil.

The Euro dropped through weekly support between the close of New York and the open in Asia yesterday reaching a low of USD1.3928 and so far the rate seems unable to hold the USD1.4000 price point.  For any move higher the Eurodollar needs to register a weekly close of USD1.43.

British Pound traded down to support at a low of USD1.6301 avoiding a drop to USD1.6280 where most likely a large number a stops will be sitting.

USDJPY fell to a low print at JPY95.69 but buyers lifted the rate back to the 96.00 price point point reaching a high of JPY96.14 in two-way action.

Currency Market Expectation

Market volumes remain thin and potentially volatile with the US closed for the Independence Day holiday.  USDJPY remains contained around the JPY96.00 area, where traders note expiry interest for the 1400GMT cut. Additional expiries seen placed at JPY96.50 and JPY97.00.

EURUSD continues to hold tight around USD1.4000, this level apparently reportedly holds the strike of an expiring option for the 1400GMT, and said to be for a decent size (US investment bank reportedly holds it). Offers remain in place from around earlier highs of USD1.4027, strengthening into USD1.4030/35 with stops above. Bids USD1.3980 ahead of USD1.3965, with bid interest dotted from this level and extending to USD1.3950.

The British Pound Pound recovery extended to USD1.6353 (76.4% USD1.6370/1.6300) before upside momentum faltered, with rate currently trading around USD1.6345.  A move above USD1.6353 may allow for a push back toward that earlier recovery high but only a break and hold on the week at 1.66 will allow this pair to move forward.

Traders are likely to return to the markets on Monday with an altered perspective, possibly looking for further upside correction in the USD amongst further sideways consolidation, although the summer lull and thin trading volumes may also lead to some sharp and random price moves.  Have a great weekend.

Published on  Fri, Jul 3 2009, 15:59 GMT