Previous session overview
The dollar and euro fell against the yen in Asia Tuesday on selling by Japanese exporters to settle their accounts, with trading direction for the rest of the day likely to depend on stock movements, dealers said.
As of 0450 GMT, the dollar stood at JPY92.72 from JPY92.97 in London Monday, while the euro was at JPY132.90 from JPY133.54. The New York market was closed Monday for a holiday. Although the overall volume of trade in Asia was thin, some Japanese exporters and short-term hedge funds sold dollars and euros, dealers noted.
The Euro continued to be buoyant as fresh gains in Asian stocks sent EURJPY higher and Economic data in Europe underpinned gains into the USD1.4300’s. July German Industrial Orders at 3.5% vs. 2% forecast. EURGBP was supported on GBP concerns ahead of the UK rate decision Thursday.
GBP peaked at USD1.6378 around the same time, but underperformed thereafter to USD1.6327. The Pound had a large bounce going into Europe as news of a USD16bn takeover offer of Cadbury from Kraft led to speculation of substantial M&A buying. This enthusiasm waned as the offer was rejected and attention turned to the MPC rate announcement on Thursday which has the potential to create further GBP downside if the Asset Purchase program is increased again from the current 175bn pounds.
The Australian dollar Tuesday continued to nudge higher while bond futures followed gains in Treasurys as dealers await a raft of top tier domestic data for the latest health check on the economy.
Market expectation
EURUSD breaks above Monday’s high at USD1.4363, with reported stops above USD1.4365 targeted and triggered to take rate on to USD1.4371. Traders note major German name buys behind the move up. Next offers seen placed from USD1.4380 through to USD1.4400, with larger stops noted above here, a break to expose much reported barrier at USD1.4450.
Topping the list of releases Wednesday is housing finance, retail sales and consumer confidence, all of which will be crucial in feeding the debate on whether the Reserve Bank of Australia tightens policy as soon as next month.
Economists expect retail sales to have grown 0.5% in July, but housing finance is forecast to drop 2.0%.
Among the data Friday is China’s industrial output. Economists surveyed forecast on average that output may increase by 12.0% in August from a year earlier, faster than July’s 10.8% increase.
If results are weaker than expected and spur a fall in Chinese stock prices, the dollar may target JPY90 and the euro may fall below JPY130.00, some dealers said. On the other hand, if results are positive, currency market reaction will likely be limited because players have already factored in such outcomes, dealers noted.
Source: Dukascopy