Dukascopy Morning Forex Overview – Oct 20 2009

Previous session overview

The euro nearly touched the psychologically important USD1.50 mark in Asia on Tuesday as falling U.S. interest rates prompted market participants to sell the greenback, while firm regional share prices encouraged them to buy the common currency instead.

The U.S. currency also fell against the yen, partly because of Japanese exporters’ selling. The volume of such sales is usually high on the 5th, 10th, 15th, 20th, 25th and 30th of every month because they tend to settle accounts on these days.

The greenback was at JPY90.20 from JPY90.56 in New York, and dealers said it may soon fall below JPY90.00 again. The Dollar Index, which measures the currency’s value against six major units, was at 75.19 from 75.37 overnight.

The euro, whose gains make exports from the euro zone more expensive, has risen about 20% versus the dollar since early March and to roughly the same degree against the Chinese Yuan, which closely tracks the U.S. currency. The European currency was trading near a 14-month high of USD1.4950 against the dollar Monday.

The British pound rallied against the dollar to a four-week high at USD1.6436 in late trading on Monday. Earlier in European morning cable dropped to USD1.6240 partly due to BOE’s Adam Posen was quote in a newspaper interview that ‘he is ready to back an increase in the Bank’s 175 billion pound quantitative easing program next month.’ However, the strength in stock markets around the globe increased the demand for perceived riskier assets.

The Australian dollar rallied to fresh 15-month highs above USD0.9300 on Tuesday as the Reserve Bank of Australia signaled there were increased inflationary risks over the medium term. In minutes of its Oct. 6 board meeting, the RBA said inflation concerns were the trigger for its decision to lift interest rates by 25 basis points to 3.25%. It also foreshadowed upward revisions to its inflation and economic growth forecasts in a coming quarterly policy statement.

Market expectation

Pound currently seen resting on the broken resistance at USD1.6425, with bid interest seen placed to USD1.6420. A break here may allow for a deeper pullback toward USD1.6505/395 with stronger interest remaining in place at USD1.6375. Above USD1.6450 may open a move toward USD1.6470/80 ahead of USD1.6500.

For EURUSD offers remain in place to USD1.5000, with talk of a mix of offers and stops placed between USD1.5005/10. Support seen placed at USD1.4965 through to USD1.4950, stronger at USD1.4920 and USD1.4880/70.

Looking ahead, players will pay attention to the earnings reports of U.S. firms to be released later the global day. If the reports show good results, U.S. stock prices will rise and the dollar will decline, said analysts.

The next key risk event for the U.K. pound will come Wednesday from the minutes of the most recent Bank of England monetary policy committee meeting, at which the MPC left interest rates and asset purchases on hold.

Data to be released on Tuesday include machine tool orders in Japan, PPI in Germany; PSNCR in U.K; building permits, housing starts, PPI and PCE in U.S.; leading indicators and BOC rate decision in Canada.

Movers & Shakers:

NZD/USD +1.15%
AUD/USD +1.09%
GBP/USD +0.73%
EUR/USD +0.64%
AUD/JPY +0.30%
CHF/JPY +0.10%
CAD/JPY +0.08%
EUR/CHF -0.24%
EUR/CAD -0.24%
EUR/AUD -0.45%
USD/SEK -0.78%
USD/JPY -0.78%
USD/CAD -0.86%
USD/CHF -0.87%
EUR/NOK -0.92%
USD/NOK -1.55%

Important levels:

Support Resistance
EUR/USD
1.4870 1.5024
1.4772 1.5080
1.4716 1.5178
GBP/USD
1.6288 1.6483
1.6168 1.6557
1.6094 1.6677
USD/CHF
1.0069 1.0195
1.0024 1.0276
0.9943 1.0321
USD/JPY
90.380 91.155
89.990 91.540
89.605 91.930

Source: Dukascopy