Dukascopy Morning Forex Overview – Oct 21 2009

Previous session overview

The dollar slipped a tad against the yen in Asia Wednesday due to profit-taking, but it may rise briefly later in the day as Japanese fund players are expected to launch their buying for new trust funds.

The profit-taking sent the dollar to JPY90.68 at 0450 GMT from JPY90.71 in New York Tuesday. The Dollar Index, a trade-weighted basket of six currencies, was at 75.52 from 75.54 overnight.

But expected trust fund-related buying is likely to turn the dollar around later in the day, dealers said.

EURUSD closed in NY around USD1.4940/45, having been pressed to lows in that session of USD1.4883 following the failure to take out the much reported barriers at USD1.5000 (USD1.4994/92 Asia-NY highs) with BOC countering any hopes for an early rate hike, which prompted strong short covering buys in dollar-Canada, seen as the catalyst for the general dollar correction. Early trade in Asia was confined to a range of USD1.4940/20 before strong sales of euro-yen by exporters after the Tokyo fix again took rate under USD1.4900 before meeting demand on the dip at USD1.4888.

Sterling extended gains, hitting a fresh four-week high against the US dollar, boosted as the greenback came under broad selling pressure with solid US corporate earnings lifting demand for perceived higher risk currencies.

The Australian dollar was lower late Wednesday as the currency’s extended rally showed signs of exhaustion, prompting the need for a temporary pause, traders said.

Market expectation

EURUSD traders note sell interest seen in place between USD1.4945/65, with stops above USD1.4975. If stops triggered may again expose USD1.5000. Failure in the USD1.4945/65 area may allow for a pullback toward the USD1.4885/70 area ahead of USD1.4860/40.

GBPUSD currently trades at USD1.6390, with demand seen at USD1.6385/80, more at USD1.6370 and ahead of USD1.6355/50. Offers USD1.6440/55, a break above here may open a move toward USD1.6490/00.

USDJPY remains under downward pressure stemming from low U.S. interest rates, pair may rise briefly in coming few days, getting tailwind from buying by Japanese institutional investors to launch new Toshin, which usually happens toward end of month, said analysts.

Some traders said that players are hesitant about buying the euro aggressively due to European officials’ complaints about a high euro, but Europe’s interest rates which are higher than the U.S.’s will likely make players push the euro up eventually.

Looking ahead, players will pay attention to releases of earnings reports from U.S. firms such as Morgan Stanley later in the global day. If results show firm business performance, stock prices will rise and the euro is likely to follow suit, dealers said

Movers & Shakers:

Important levels:

Source: Dukascopy