Dukascopy Afternoon Forex Overview – Oct 6 2009

Previous session overview

The dollar dropped overnight Tuesday as the Reserve Bank of Australia hiked interest rates, the first G20 country to do so, putting added pressure on the low-yielding greenback.

The rate hike comes at a time when U.S. interest rates are still ultra-low, making the dollar less attractive to investors. The RBA’s move reinforces the impressive the U.S. could lag behind other countries in raising rates as the world pulls out of the financial crisis.

Also hurting the dollar in overnight trading was a report in the U.K. newspaper The Independent suggesting that Gulf States were going to switch to a basket of currencies from the dollar for the oil trade.

U.S. interest rates are likely to remain low for some time – putting pressure on the dollar – amid weak inflation and a modest economic rebound, a top Federal Reserve official said Monday.

EURUSD is stronger in New York morning trading, though slightly off its overnight highs, as Australia central bank raises key interest rates, making it the first G-20 country to do so. EURUSD is at USD1.4736; from USD1.4651 late Mon. USDJPY is at JPY88.95 from JPY89.54, while GBP is at USD1.5919 from USD1.5942.

Market expectation

USDJPY breaks below overnight lows with market players now targeting the post-payroll lows near JPY88.60. Stops seen sub JPY88.50.

EURGBP semi-official supply again noted in the cross, though not having the same impact as in the European morning when the same account forced the rate under stg0.9200 with an order reputedly worth E1bn.

EURJPY traders saying euro-yen looks cheap at these levels, expressing surprise that the cross has not rallied further. Asian names were noted buyers in the European morning as the rate extended highs above JPY131.50 with limited follow-through. Offers noted into JPY131.60/65, more around JPY132.00 with stops above.

Movers & Shakers:

Important levels:

Source: Dukascopy