Dukascopy Afternoon Forex Overview – Sept 21 09

Previous session overview

The dollar is stronger Monday in New York as the yen and higher-yielding currencies give back some of their recent gains versus the greenback while investors consolidate their positions.

With markets in Japan, Singapore and several other Asian countries closed Monday for holidays, the dollar took advantage of thin conditions to push to an almost two-week high against the yen, although remaining in range.

Little data is on tap and volumes are low, so investors may have chosen to continue to take profits and pare back on riskier positions. This move began Friday, with the dollar advancing on the euro and a string of other currencies.

One of the session’s more active currencies, the U.K. pound, remains under pressure after reports late last week of fresh problems in the U.K. banking sector. Also, a regular report from the Bank of England said concerns over U.K. debt may have contributed to the pound’s decline since the start of the global financial downturn.

Since traders returned from the U.S. Labor Day holiday earlier in September, the dollar has been on a near-constant slide, though it has strengthened slightly in more recent trading sessions on mixed equities and as traders seek safety before this week’s meetings.

Market expectation

EURUSD got a modest uptick from earlier low at USD1.4612 area, the pair said to have enjoyed some demand from short-term system accounts. Bids still intact at USD1.4600 area but stops in placed below there that interest reported earlier and recently affirmed.

EURGBP squeezing back toward earlier Asian lows at stg0.9045, as cable recovers back above USD1.6150 while euro-dollar retains a soggy undertone after reported US investment house sales. Euro-sterling demand noted between stg0.9045/40, a break to allow for a deeper pullback toward stg0.9010/00. Resistance remains in place between stg0.9080/90.

Pound eases back toward earlier lows at USD1.6134, as rate tracks euro-dollar slippage, with euro-sterling taking on some of the pressure as it eases back to stg0.9055/50 area. Cable demand seen placed from around USD1.6115 through to USD1.6100.

All eyes will be on Wednesday’s meeting of the Federal Open Market Committee, at which time members will decide whether to increase ultra-low U.S. interest rates. The FOMC is not expected to raise rates, though investors will be listening for any signals as to when the Fed will start tightening monetary policy.

The dollar could see some support before this week’s meetings as investors square their positions take profits in the recent rally in the euro and other higher-yielding currencies and seek safe-haven shelter in the buck, analysts said.

Furthermore, a correction in global equities markets also could boost the greenback, if only temporarily, analysts said.

Important levels:

Source: Dukascopy