Dukascopy Morning Forex Overview – Sept 10 09

Previous session overview

The dollar extended its losses against the euro and yen in Asia Thursday as Asian asset management funds and short-term players sold the U.S. unit on mounting concern that the country’s economic recovery may be slower than expected.

Those fears, triggered by a Federal Reserve report released overnight, prompted Asian players to get behind the dollar-selling that predominated in New York trade.

The Fed’s Beige Book report drew attention to flat retail sales despite government purchase incentives, and further clouded expectations for the bank to raise interest rates in the near-term, dealers said.

Meanwhile, the dollar stood at JPY91.98 compared to JPY92.08. Dealers said the unit could fall as low as JPY91 toward the end of the month, when Japanese firms are expected to repatriate overseas earnings, for which they must sell the dollar.

The euro dollar pair inclined recording a high of USD1.4580 and a low of USD1.4542, having the union currency trading around USD1.4575. Yesterday the pair managed to breach the USD1.4550 resistance level to get to the USD1.4602 level where it found a strong resistance to start falling again back to the USD1.4540 levels.

The Pound rallied with the Euro but was capped again ahead of USD1.66 as traders pared back positions ahead of today MPC rate decision. Risk appetite and general USD weakness is providing support but the pound is losing ground on many crosses as it fails to match gains.

The Australian dollar yielded strong overnight gains in local trading Thursday after news of a larger-than-forecast drop in employment in August prompted markets to scale down the chances of a rate hike before year end.

Market expectation

The euro continues to hold near its highest levels of the year while the dollar remained on the defensive as investors continued to favor riskier assets.

For EURUSD offers seen placed from around the USD1.4585 level through to USD1.4600, Asian names suggested, with main stops gathering above USD1.4620. Bids now seen placed between USD1.4545/40 (76.4% USD1.4532/1.4585), a break below to expose stronger demand placed toward USD1.4530 with stops placed on a break.

For Pound offers seen placed from USD1.6566 through to USD1.6576 (76.4%) ahead of stronger interest placed between USD1.6590/00. Support remains at USD1.6525/20, a break to open a deeper move toward USD1.6510/00 (USD1.6507 61.8% USD1.6455/1.6592) ahead of USD1.6487 (76.45). Below here may allow for a deeper move toward USD1.6455/45.

Traders also said that a recent rise in gold prices, which tend to move inversely with the greenback, also suggests continuing dollar weakness. Spot gold was at USD992.90 an ounce in Asian trade Thursday, up 50 cents from its New York close.

European stocks are expected to start the session flat overall Thursday after the main indexes closed at new highs for 2009 in the previous session as the appetite for equities increased.

Source: Dukascopy