Dukascopy Morning Forex Overview – Oct 13 2009

Previous session overview

The dollar rose against the yen in Asia on Tuesday as Japanese importers bought a larger volume of greenbacks than usual to settle accounts after a three-day weekend.

But the trend remains negative for the dollar, which will likely soon resume falling, dealers said. Many short-term investors believe the U.S. Federal Reserve will be forced to keep its interest rate low for now due to the country’s slow economic recovery, despite recent hawkish comments by Fed Chairman Ben Bernanke.

At 0450 GMT, the dollar stood at JPY89.90 from JPY89.83 in New York on Monday. The Dollar Index, which measures the dollar’s value against the basket of major currencies, was at 76.17, unchanged from overnight in New York.

The euro was at USD1.4782 from USD1.4784 and JPY132.86 from JPY132.76.

On Monday EUR rallied from the Sydney close, reaching USD1.4813 where it has consolidated.

GBP was under pressure, dipping to USD1.5729, a post-May low, but has recovered to USD1.5820 for little change. PM Gordon Brown added to the view that monetary stimulus should remain in place for several years, given the dire fiscal position.

The Australian dollar was modestly stronger but off recent 14-month highs in late Asian trade Tuesday on the back of a broader improvement in risk-sensitive asset prices. Thin trading volumes with U.S. markets mostly closed for a public holiday Monday keeping price action fairly muted though a broad rally in regional equities helped keep the Australian unit in positive territory.

Market expectation

Major currency pairs are little changed so far Tuesday yet the euro has the favorable odds and the pound and dollar look vulnerable.

European stock markets are expected to open lower Tuesday, as investors pause for breath and wait for the release of some high-profile corporate earnings figures this week to provide fresh impetus.

For EURUSD offers said to remain in place between USD1.4800/20, a break to open a move back toward USD1.4845 (Sep23 high) with stronger offers noted from here and extending to USD1.4850. This latter level holds option barrier interest, part of which rolls off today. Bids remain in place to USD1.4760/55 with talk of stops positioned on a break below with further stops seen dotted down to USD1.4730.

Market participants will be watching the German ZEW economic sentiment indicator for October, due at 0900 GMT, as well as earnings reports from U.S. companies such as Intel Corp.

If the results of these data and earnings reports come in stronger than expected, risk tolerance will improve, leading to selling of the safe-haven U.S. unit, said analysts.

Later in the week, investors will be watching Wednesday’s release of U.S. retail sales and Thursday’s data on the U.S. consumer price index. The minutes from the most recent meeting of the Federal Reserve’s interest-rate-setting body, the Federal Open Market Committee, will be released Wednesday, and will be pored over by investors, analysts said.

Movers & Shakers:

Important levels:

Source: Dukascopy