Dukascopy Afternoon Forex Overview – Oct 16 2009

Previous session overview

The dollar is stronger against the euro in early New York trading Friday as investors take end-of-week profits and higher-yielding currencies take a breather after big run-ups over the past week.

But even though the dollar is being given a brief respite from its recent drubbing, the euro will rise again, analysts said.

The dollar continued to strengthen against the yen after analysts said key technical levels on Thursday were tripped, which sent the dollar higher against the yen.

The pound also continued to strengthen against the dollar, as investors who had shorted the British currency are now being squeezed out of the market as new investors flood into the pair, analysts said.

Meanwhile, U.S. Treasury Secretary Timothy Geithner said in a television interview that the U.S. dollar would retain its role as the world’s reserve currency, but acknowledged maintaining its status entails “special obligations and responsibilities” to keep the dollar’s value from eroding.

Market expectation

Investors are looking toward several pieces of data to be released Friday, including the Treasury International Capital report, industrial production numbers and consumer confidence data.

Strong economic data could give the euro a boost if investor’s trade based on risk, with rosier data supporting an economic recovery and higher-yielding assets over the safe-haven dollar.

The TIC data is expected to show buying of U.S. Treasurys lent support to foreign inflows into the U.S. though analysts will be watching to see how much money U.S. investors are sending abroad, as the global economy recovers and investors abandon the dollar to chase higher yields overseas.

EURJPY pullback from highs above JPY136.00 seen in the European morning are so far contained ahead of JPY135.50, with technical analysts saying the outlook is positive after yesterday’s break and close above the Ichimoku cloud, today seen as pivotal at JPY133.81. On the topside, the rally has so far stalled in line with the August 24 high at JPY134.09. A break above this area may expose the next tech level at JPY136.44 (76.4% retrace August-October sell-off).

EURUSD continues to pivot around USD1.4880, following earlier reports of semi official demand seen around this area. However, rate did manage to extend intraday lows to USD1.4868, currently back around USD1.4884. Bids earlier reported in place between USD1.4865/60, more between USD1.4845/40. Offers remain in place at USD1.4925.

Movers & Shakers:

Important levels:

Source: Dukascopy