Dukascopy Afternoon Forex Overview – Oct 2 2009

Previous session overview

The euro is retracing immediate losses against the dollar after falling to more than a three-week low early Friday on the release of a disappointing U.S. payrolls report.

The common currency declined to USD1.4480. It has since turned higher on the day, although it is trading at lower levels than before the data release.

Employers eliminated 263,000 jobs in September, more than expected, as the unemployment rate climbed to 9.8%, the Labor Department said.

When traders pare back riskier bets on discouraging economic data, the higher-yielding currencies usually decline against the funding currencies, which typically have lower interest rates.

The dollar remains down against the yen. Analysts said this currency pair has been trading more closely with fixed-income markets lately, and long-end yields are down, putting pressure on the buck.

The euro, meanwhile, has also recovered against its early fall against the yen. It fell to its lowest level since July 13, JPY129.03.

EURUSD hit an intraday high, at USD1.4618, from USD1.4526 late Thu. The common currency had dipped as low as USD1.4480 on disappointing US jobs data, but has since retraced those losses. USDJPY is at JPY89.03 from JPY89.77 late Thursday via CQG. GBPUSD is at USD1.5882 from USD1.5940.

Market expectation

Markets are likely to remain cautious ahead of the Group of Seven meeting of the world’s richest nations this weekend, with investors listening to hear whether finance officials discuss currencies, analysts said.

Analysts also are keeping an eye on the euro zone, as Irish voters decide whether to accept a E.U. constitution. Some analysts said currency trading could be volatile, depending on the results of the referendum. Polls are open until 2100 GMT.

EURUSD makes a marginal fresh high for the day around USD1.4566 with reported supply at USD1.4565/70 area only slightly eroded on the move. Pair settles back to USD1.4553 currently.

EURJPY extending the recovery off the post-data lows and bringing reported offers at JPY129.60 into play. This area seen as pivotal to future direction, (200-day JPY129.64). Additional supply noted at JPY130.00/10.

Movers & Shakers:

Important levels:

Source: Dukascopy