Dukascopy Morning Forex Overview – Sept 17 09

Previous session overview

The dollar rose slightly against the yen in Asia Thursday due to technical buying related to options contracts, but traders said the unit may soon resume falling due to lingering dollar-bearish sentiment.

The greenback rose to JPY91.09 in Tokyo from JPY90.78 in New York Wednesday, as non-Japanese investors holding options contracts that make money if the currency stays above JPY90.60 bought dollars, dealers said.

But these contracts will expire later in the global day – meaning their holders won’t have to keep supporting the dollar – and that could be a cue for other players to start selling the unit again.

The euro reached a fresh 12-month high against the dollar Wednesday as U.S. stocks and crude oil prices rose, supporting risk appetite. At 0620 GMT Thursday, the single currency was at USD1.4745, up from USD1.4710 late in New York.

The British pound remains vulnerable in the wake of yesterday’s dovish comments by the UK central bank. UK labor data showed jobless benefits rose by 24,000 in August which was broadly in line with expectations. International Labor Organization measure of unemployment rose by 210,000 in the three months to July, pushing jobless rates to 7.9%.

The Australian dollar set a new 13 month high on Thursday as U.S. dollar weakness showed no sign of abating, setting high yielders on course for further gains. Spurred on by rampant desire for so-called riskier assets and a tidal wave of support for regional equities, the Australian dollar reached an intraday high of USD0.8769, its highest since August 2008.

Market expectation

The euro is higher against the U.S. dollar and the yen as the appetite for risk continued to pick up Thursday but the market is hearing rumblings that the dollar’s retreat may have gone too far and too quickly.

EURUSD trades to USD1.4766 and takes out the second reported barrier at USD1.4760, with rate now taking a ‘rest’ back toward USD1.4750 after ‘early work done’, traders suggest. Offers now seen placed between USD1.4770/80, a break above to turn focus on USD1.4800.

USDJPY falls, as some options with strike around JPY90.60 expired, meaning some players no longer need to keep buying USD to defend positions, say dealers. Tips initial support at JPY90.10. Says more options with similar strike, type will expire later in global day, meaning USDJPY may get more downward pressure. Adds pair likely to fall below 90.00 in global day. Last at JPY90.94 against JPY91.23 earlier.

European stocks are expected to build on their gains for the fourth consecutive session this week, as investors turn increasingly optimistic that a global economic recovery is underway.

About Australian dollar analysts said the currency is going one way only and he recommends go long against a basket including the Yen, euro, dollar, Swiss franc and New Zealand dollar.

Source: Dukascopy