Previous session overview
The dollar held gains versus major rivals Thursday after weekly initial U.S. jobless claims posted a smaller-than-expected rise.
The Labor Department said 545,0000 Americans filed initial claims for jobless benefits in the latest week, down 12,000. A separate report said housing starts increased to a 598,000 annualized pace in August.
The dollar has been on the ropes in recent weeks. Pressure has been tied in part to rising risk appetite, which has seen investors shun the greenback’s safe-haven status in favor of equities and other assets.
Analysts also blame low U.S. interest rates, which have made the dollar an attractive vehicle for carry trades that center on borrowing in dollars and then purchasing higher-yielding assets.
The euro gained to a fresh one-year high of USD1.4768. The Australian dollar advanced to its highest level since August 2008, USD0.8775. The Canadian dollar also rallied and the U.S. unit fell as low as CAD1.0608, its lowest level since last October.
Market expectation
EURUSD upside still seen as the least course of resistance despite recent correction lower from USD1.4768 level last traded Sept 2008. Risk is seen to the 2.00% moving average envelope, which is still widening and today valued at USD1.4843. The daily studies are pointing higher and showing no sign of reversing lower.
EURGBP reported demand interest, placed down to stg0.8890, continues to provide a cushion, as rate attempts to extend pullback from earlier Asian highs at stg0.8934. Further demand noted between stg0.8885/80 with stops below. Rate currently trades around stg0.8903, off recent lows at stg0.88975.
USDJPY lifts over JPY91.50 area in the wake of the US data, dollar popping to JPY91.60+ as offers around JPY91.50 were absorbed, the pair stalling shy of further supply at JPY91.70. Pair still underpinned by earlier chunky buys by a US name as the US session got underway.
The grinding nature of the USD lows suggests that sellers are being met with willing buyers on the dips but the buyers just don’t have what it takes to reverse the oversold condition. Analysts said as long as equities continue to advance it will be harder to reverse bearish sentiment but a correction in USD could happen anyway as shorts are over-extended; equities might follow the USD rather than the other way around. They suggest keep looking for the clues that a USD reversal is brewing as the majors are all over-extended at this point.
Source: Dukascopy