Dukascopy Morning Forex Overview

Previous session overview

The U.K. pound fell sharply in Asia Tuesday, dragging the euro down with it, due to reported remarks by a senior official at Fitch Ratings that the U.K. is most at risk among major economies of losing its AAA status.

Fitch’s co-head of global sovereign ratings David Riley made the remarks in an interview with Reuters earlier in the day.

The yen rose slightly against the euro and dollar Tuesday. The euro was at JPY134.44 from JPY134.90 in New York and the dollar was at JPY89.73 from JPY89.99. The rise was mostly due to Japanese exporters, who sold the two currencies against the yen as part of their regular monthly settlement.

The euro rallied toward USD1.50 on Monday amidst broad-based US dollar weakness, as well as signs that the Euro-zone largest economy may be pulling the region out of recession thanks to increased trade. The German trade balance surged to 10.6 billion euros in September (not seasonally adjusted), as exports rose 3.8 percent while imports increased 5.8 percent.

The British pound may have gained nearly 1 percent against the US dollar and Japanese yen, but the currency generally fell versus the rest of the majors as there are lingering concerns that the Bank of England will continue to expand their quantitative easing program.

The Australian dollar edged higher in Asia trade on Tuesday and is tipped to climb further in the near term as economic fundamentals continue to favor appreciation.

Market expectation

Pound traders flash up that a ‘good name’ was a noted buyer in the USD1.6630/35 area, with rate pushed up to current level around USD1.6655. Offers seen placed toward USD1.6680.

The euro also slipped against the dollar, but dealers said the single currency is likely to claw back its losses, as investors’ long-term sentiment suggests the greenback will remain under selling pressure as the Federal Reserve may have no choice but to keep its rates low to boost economic growth.

Euro-dollar bids remain at USD1.4950, with resistance USD1.5020/30. Russian sales of euro-dollar into early Europe ease rate back to USD1.4982.

European stock markets are expected to open modestly higher Tuesday after the Dow Jones Industrial Average hit a new 2009 high, and strong gains in Asia, as upbeat sentiment after the Group of 20 meeting continued to lend support.

Giving a firm signal the government is relaxed with any test of parity against the U.S. dollar, Australia’s Trade Minister said the Australian dollar could rise to parity with the U.S. currency, and the country’s manufacturers will have to learn to live with it.

Movers & Shakers:

CAD/JPY +0.84%
NZD/USD +0.80%
EUR/GBP +0.62%
AUD/USD +0.53%
EUR/USD +0.44%
AUD/JPY +0.28%
CHF/JPY +0.21%
EUR/JPY +0.19%
AUD/NZD -0.26%
GBP/JPY -0.42%
USD/CHF -0.44%
GBP/CHF -0.63%
EUR/CAD -0.64%
EUR/NOK -0.70%
USD/SEK -0.77%
USD/CAD -1.07%
USD/NOK -1.13%

Important levels:

Support Resistance
EUR/USD
1.4895 1.5068
1.4784 1.5131
1.4721 1.5242
GBP/USD
1.6645 1.6878
1.6511 1.6977
1.6412 1.7111
USD/CHF
1.0029 1.0149
0.9982 1.0222
0.9909 1.0269
USD/JPY
89.620 90.190
89.375 90.515
89.050 90.760

Source: Dukascopy