Dukascopy Morning Forex Overview – Oct 8 2009

Previous session overview

The dollar fell against the yen and the euro in Asia on Thursday as players sold the low-yielding U.S. unit as strong Australian jobs data strengthened the view that the U.S. will lag other countries in raising interest rates.

The comparatively slow pace of the U.S. economic recovery – expected to keep the country’s policy rate at an ultra-low 0.00%-0.25% until well into next year – was highlighted by the surprisingly strong Australian jobs report in the morning session.

Australia added 40,600 jobs in September, official data showed, with the unemployment rate falling to 5.7%. Economists had expected the number of jobs to fall by 10,000 and the jobless rate to rise to 5.9%.

The strong showing contrasted sharply with September U.S. non-farm payrolls, which shed a greater-than-expected 263,000 jobs, pushing unemployment up 0.1 percentage point to 9.8%.

At 0450 GMT, the dollar was down to JPY88.26 compared with JPY88.62 late Wednesday in New York.

Euro dropped back against the dollar to USD1.4650 low in the NY session, recovering to close around USD1.4690. Traders said the rate climbed to USD1.4705 prior to the Tokyo open, with demand said to be coming from a US macro account, as well as CTA’s. A generally weaker greenback and the strong rally in Aussie then provided uplift as euro-dollar climbed steadily over the morning session to highs at USD1.4774, taking out Tuesday’s NY highs (USD1.4763) along the way.

Pound hit a five-month low after yesterday’s surprising fall in UK manufacturing output cast a negative light on the currency. Although there is negative pound sentiment in the market, Britain’s sentiment of their present circumstances, future prospects and willingness to spend has reflected an improvement.

A shock rise in Australian jobs numbers pushed the local currency up through the USD0.90 level for the first time since August 2008 in late Asian trade Thursday. The stronger-than-expected employment data defied expectations of a weakening and reinforced speculation about near-term interest rate rises.

Market expectation

Dealers said the dollar could fall further against its major rivals during the rest of the global day, as sentiment toward the currency continues to sour.

Dealers said European and U.S. market participants may later push the dollar down further. The U.S. unit may fall to JPY87.90, while the euro could rise to USD1.4860, said analysts.

The greenback may continue to struggle in the coming months, particularly if the lingering problems of U.S. financial institutions toxic assets come to the fore, traders said.

For EURUSD offers said to come in at USD1.4775, more at USD1.4800, though with the ECB rate announcement and press conference due later today, traders foresee a quiet morning ahead. A break above USD1.4800 would expose this year’s highs from September just shy of USD1.4850.

European stocks are expected to open higher Thursday after the earnings season kicked off late in the U.S. in fine form.

ECB President Jean-Claude Trichet could potentially use his press conference to bemoan the dollar’s current weakness.

Meanwhile, traders may be looking later on to take profit in the euro against the pound.

Movers & Shakers:

Important levels:

Source: Dukascopy