Dukascopy Afternoon Forex Overview – Oct 8 2009

Previous session overview

The euro has ceded the gains it made against the dollar Thursday morning after European Central Bank President Jean-Claude Trichet said excessive currency volatility is negative for the economy and financial stability and that U.S. support for a strong dollar is extremely important.

The comments initially sent the euro to a session high at enabling to reach a high at USD1.4802, its highest level since Sept. 24.

Such rhetoric would normally be expected to quell euro strength against the dollar, but they fell short of expectations Trichet might use stronger language against the euro’s recent strength. That initially prompted a modest relief rally in the common currency.

The Australian dollar has leapt higher once again – rising to a 14-month high at USD0.9051, its highest level since August 2008. It has since retreated slightly to the USD0.9021 area.

The dollar’s earlier slide against the yen took it to a low at JPY88.15, just above the critical JPY88.00 level where options barriers helped trigger a sharp rebound by the dollar Wednesday.

Market expectation

EURGBP stops goes off in the cross under stg0.9170 as cable retains a firm tone just off earlier highs. Technical analysts note the break back below the 5-day moving average at stg0.9190, with the next pocket of demand noted at stg0.9150/40.

EURUSD euro slips as bund yields edge lower on Trichet comments. Light bids seen at USD1.4740 – not much below that until option expiry at USD1.4700.

USDJPY holds mid range with little impetus, so far, to go one way or the other. Bid seen placed near Wed’s lows around JPY88.00, but stops kick in below JPY87.90. Option expiry is below at JPY87.75. Market players will target a return to the double-bottom lows around JPY87.10, if JPY88.00 decisively gives way. On the topside, the pair will need to clear JPY89.00 (option expiry) for upward momentum to mount, traders say.

Movers & Shakers:

Important levels:

Source: Dukascopy