Previous session overview
The euro rose to a near nine-month high against the dollar in Asia Wednesday as soaring commodity prices spurred players’ risk appetite, increasing demand for the risk-sensitive unit.
The euro, which usually benefits from higher crude oil and gold prices, rose to as high as USD1.4518, near USD1.4535 marked on Dec. 18 last year. Crude oil futures on the New York Mercantile Exchange stood around USD71 a barrel, close to its five-business day high. Gold on the spot market stayed above a six-month high of USD1000 an ounce in Asia.
The common currency also briefly hit a 12-day high of JPY134.17 against the yen.
The Euro as stated above the Euro broke higher against the dollar with the key USD1.4450 level giving way and USD1.4500 quickly following. Gold and Soaring Oil combined with strong global stocks to underpin the move higher. German July Industrial Output fell unexpectedly to -0.9% vs. 1.5% forecast.
Similar to euro, cable started its rally in European morning in line with the greenback’s broad-based selloff and the release of stronger-than-expected U.K. industrial and manufacturing production data (industrial production in July came out as 0.5% and -9.3% respectively, beating the forecast of 0.2% and -10.1% while manufacturing data came out as 0.9% and -10.1%, better than 0.3% and -11.1% in forecast), price latter rose to as high as USD1.6590 at NY opening before a retreat occurred due to profit-taking.
The Australian dollar ended higher on Wednesday, although well below its session peak, after weaker-than-expected retail sales dented expectations for an early rate hike. Interest rate futures rallied hard after retail sales for July fell 1.0% on month against an expected gain of 0.5%, indicating waning consumer demand as the government’s fiscal stimulus afterglow fades. Traders immediately wound back bets the Reserve Bank of Australia will hike rates in October, which were reinforced by an expected 2.0% fall in housing finance.
The European unit will likely strengthen against the dollar for now because players are worried that higher commodity prices will hurt the U.S. economy, dealers said.
For EURUSD sell interest said to remain in place from USD1.4520, with further offers seen placed around the NY high at USD1.4535. Above here suggested option barrier at USD1.4550 moves into view. Bids seen placed from around USD1.4470, with interest extending to USD1.4450 with stops placed on a break of USD1.4440.
USDJPY rising, but should be capped at JPY92.60-92.70 level as no reasons to support USDJPY gain, says dealers. Says some European players buying pair to settle accounts, but amount appears small, says USD1 million or so in total; impact being magnified as flows still thin.
Europe’s major stock indexes are expected to open little changed Wednesday, after a shaky session in Asia and with investors struggling to determine direction following successive days of gains.