Dukascopy Morning Forex Overview – Oct 6 2009

Previous session overview

The dollar fell against the yen and euro in Asia Tuesday as Asian hedge funds and other short-term players sold the U.S. unit after a report said that Gulf States are planning to stop using the dollar for oil dealing.

The U.K’s Independent newspaper reported on its website Tuesday that Gulf countries have held secret meetings with officials outside the region to discuss dropping the dollar. The countries would instead use a basket of currencies, including the yen, the paper said, citing Gulf Arab and Chinese banking sources in Hong Kong.

The report increased recent negative sentiment toward the dollar, which could fall further against the yen and other rivals later in the day, dealers said.

The greenback was also weaker against the euro, which traded at USD1.4716 at 0450 GMT compared to USD1.4651. The common currency will target USD1.4800 in the coming days, dealers said. The Dollar Index, which measures the currency’s value against six major units including the euro, was at 76.39 from 76.68.

The Pound was largely mixed finding support on UK PMI Services figures rising to 2 year highs of 55.3 from last month’s 54.1. Nonetheless the GBP continues to be hampered on fears that the UK government will be faced with a financing gap of 215 billion pound in 2009 which equates 15% of UK GDP.

The Australian dollar surged to a 14-month high in Asia late Tuesday following the Reserve Bank of Australia’s decision to raise interest rates, a move that caught some market participants by surprise. The central bank became the first Group of 20 central banks to tighten policy, increasing its cash rate target by a quarter of a percentage point to 3.25% Tuesday citing a need to remove expansionary policy.

Market expectation

The euro and U.K. pound are higher Tuesday against the dollar, but they may see some profit-taking later on their intraday gains. Meanwhile all three are slightly lower against the yen.

EURUSD continues rising, buoyed by entry of European players, USD-negative sentiment amid higher commodity prices, report in U.K. newspaper The Independent that Arab states planning to stop using USD for oil dealings, say dealers. Pair rises to fresh intraday high at USD1.4750; next target at USD1.4800, dealers say, just shy of USD1.4803 high marked on September 24. After that focus would turn to year’s high at USD1.4845.

European stocks are expected to open higher Tuesday following a strong session in the U.S. that ended with a triple-digit gain for the Dow Jones Industrial Average.

AUDUSD and NZDUSD should be well supported today, given the global risk backdrop from last night, and local data, analysts said. The AU trade balance is expected to be AUD supportive, but the wild card will be the RBA’s rate announcement, half the market thinking they’ll hike 25bp. NZ’s important Q3 business opinion survey should be bullish.

Movers & Shakers:

Important levels:

Source: Dukascopy