Dukascopy Morning Forex Overview – Sept 11 09

Previous session overview

The dollar fell to multi-month lows against the yen and euro in Asia Friday as Japanese investors unloaded the U.S. unit, likely dismayed by recent drops in U.S. interest rates.

The greenback briefly touched JPY91.22, the lowest since JPY91.12 on Feb. 16. The euro rose to USD1.4620, the highest since USD1.4720 on Dec. 18.

Traders said that the dollar’s current round of downtrend against the yen that started in early August has more room to run based on technical charts as well as actual money flows.

The selling of dollars by Japanese institutional investors, and non-Japanese bankers that followed suit, came after U.S. Treasury bonds rallied strongly a day before, sending their yields lower.

Euro retreated from USD1.4608 to USD1.4502 in U.S. morning on cross selling due to long liquidation; however, price received a boost from strong U.S. equities and rose to another fresh 2009 high of USD1.4614 in New York afternoon.

GBP posted a decent gain from USD1.6481 to USD1.6687, but has room to catch up to the EUR’s performance this year. The BoE meeting last night did not result in any increase in quantitative easing, removing one headwind for sterling.

The Australian dollar was trading just below 1-year highs versus the U.S. dollar in late Sydney trading Friday, supported by a weak U.S. dollar and news of strong August Chinese industrial production. However, against crosses like the yen, the Australian dollar continued to struggle, ending weaker on the day.

Market expectation

The euro and U.K. pound are favored to make further gains against the dollar on Friday as a cavalcade of negatives line up against the U.S. currency.

A sunnier global economic outlook and continuing strength in stocks and commodities are leading investors out of the safe-haven dollar and into the higher-yielding euro.

European stocks are expected to open higher Friday after solid gains on Wall Street following better than expected jobless claims data and a largely positive session in Asia.

Early Europe provided additional demand, extending move to USD1.4627 but late talk of sell interest placed toward USD1.4630 countered. Rate currently trades back around USD1.4615. A break of USD1.4630 to expose the USD1.4650 barrier, with talk of stops above, which if triggered will bring the larger USD1.4700 level into view. Larger barrier interest noted here, and expected to draw stronger protective selling ahead, with large stops noted above. Support seen placed at USD1.4560/50, with interim interest around the Asian lows of USD1.4571.

Traders remain focused more on U.S. data, including a final University of Michigan consumer sentiment index for September to be issued later in the global day.

Source: Dukascopy