Dukascopy Morning Forex Overview – Sept 23 09

Previous session overview

The U.S. dollar tumbled across the board in Asia on Wednesday, hitting fresh annual lows against the euro, the New Zealand dollar and the Australian dollar ahead of the latest update on monetary policy by the U.S. Federal Reserve expected later in the day.

After a shaky start to the day, the greenback regained lost ground as Asian stocks went into negative territory, but remains weaker overall. This has been sustained by the widely held view that U.S. rates will remain at ultra-low levels for a sustained period, minimizing the appeal of U.S.-dollar holdings.

The U.S. dollar traded at JPY90.87, down from JPY91.18, but still clear of last week’s lows just above JPY90, as Japan’s markets remain closed for holidays since Monday. They reopen Thursday.

The Euro rallied from the start of Asia to test USD1.4800 in Europe before consolidating gains around the figure. Key resistance is seen at USD1.4850-70 and then onto the Key Psychological Level of USD1.5000.

Sterling traded sideways in Asia and rallied in European session due to greenback’s broad-based weakness and also short covering against euro (EURGBP retreated from 5-month high 0.9082). Cable continued to move higher in U.S. session as strong equity markets encouraged demand in high-yielding currencies.

The Australian dollar rallied to a fresh 13-month high Wednesday helped by yet more weakness in the U.S. dollar in the Asia session. The Australian dollar was quoted at USD0.8760, up from USD0.8685 late Tuesday. Against the Japanese yen, it was quoted at JPY79.475, down from JPY79.65. The currency hit a fresh 13-month high of USD0.8787 in early trading.

Market expectation

The dollar, U.K. pound and euro are falling against the yen on Wednesday, but the euro and pound are higher against their U.S. rival, signaling that appetite for risk is still growing.

For EURUSD bids seen placed at USD1.4800, a break to allow for a deeper pullback toward USD1.4785/80 ahead of USD1.4770 (NY low USD1.4769). Talk of demand dotted from this latter level down to USD1.4755 with stops placed on a break below. Offers seen placed at USD1.4835/40, more toward USD1.4850.

Cable found some resistance ahead of USD1.6400, the break and clear above eventually allowing rate to post highs at USD1.6415 before slipping back to settle around USD1.6385 into early European dealing. Offers remain in place around USD1.6415, more toward USD1.6430 with reports of stops placed on a break above. Bids seen placed from around USD1.6365 through to USD1.6350, with stops placed on a break below. BOE Minutes this morning’s focus (0830GMT), most expect a 9-0 vote to keep rates unchanged though could see a 7-2 split in the vote for QE expansion (King and Miles voting for an increase).

More negative news for the currency may come Thursday and Friday when leaders from the Group of 20 nations will meet in Pittsburgh. Any comments on the dollar’s role as the global currency, the ongoing economic recovery or financial regulation will be watched closely.

Movers & Shakers:

Important levels:

Source: Dukascopy