Dukascopy Afternoon Forex Overview – Aug 28 09

Previous session overview

The dollar advanced marginally on a broadly lower Japanese yen Friday but traded mixed against other major currencies as European equities gained ground and stocks opened higher on Wall Street.

The euro and Australian dollar advanced to session highs against the U.S. unit, with renewed appetite for riskier assets.

The market momentum was set motion late Thursday and continues into Friday with strong equities.

The Dow Jones Industrial Average recently opened up on the day.

The euro gained as high as USD1.4388, shy of Thursday’s sharp rally to a three-week high of USD1.4407.

The Aussie gained to USD0.8470. The currency is finding additional support on reports that a rate increase could occur next month, if not next week.

The dollar is also under pressure against the yen, near an intraday low, extending its broad sell-off from a day earlier against not just riskier rivals, but also traditionally safe haven assets.

Currency markets are very thin, though, as summer wears down and ahead of a bank holiday in the U.K., which could lead to exaggerated and jumpy movements.

Market expectation

Risk appetite remains the dominant theme in otherwise choppy, range-bound currency markets, analysts said. The yen bore the brunt of the exit from perceived safe havens, they said.

EURUSD retreats to USD1.4365 area as Dow backs off into negative territory, euro-dollar continuing to struggle to hold gains but market remaining lackluster ahead of the long UK weekend and month-end. Focus turning to the London fixing at the top of the hour, expectations are for dollar sales related to strong US equity gains this month but, as always, the event remains difficult to predict.

Pound extends the pullback from the early US highs, dropping back with stocks and looking set to test light demand into USD1.6300. Order board in general said to look thin ahead of a public holiday in the UK Monday. A break below the figure may find light demand at USD1.6260/50. Offers back at USD1.6380/00 and USD1.6440.

Tracking slippage in stocks and moving back towards a reported pocket of demand of EURJPY in the JPY134.40 area. Underlying tone remains positive after the strong bounce back from the brief dip into the Ichimoku Cloud yesterday. Offers eyed into JPY135.00, techs also seeing trend line resistance here, ahead of Ichimoku resistance at JPY135.46.