Dukascopy Afternoon Forex Overview – Sept 22 09

Previous session overview

The dollar sold off broadly overnight Tuesday, reversing gains from the two previous global sessions to hit new 12-month lows against the euro and Swiss franc.

Investors turned to higher-yielding currencies as most Asian shares and European stocks moved higher, triggering a new wave of risk-taking. In early New York trading, high-yielding currencies have backed off their overnight highs and trading is somewhat volatile.

The dollar bloc currencies were the top performers in the overnight session, led by the New Zealand dollar, which set a new high for the year after posting its lowest annual current account deficit in more than four years, said analysts.

Against a backdrop of dollar weakness, the U.K. pound strengthened. The pound had been under pressure over concerns about its banking system and policy official comments that it might lower key interest rates even further.

The euro pressed above the USD1.48 level for the first time in a year and remained solidly higher at USD1.4777, up from USD1.4690 late Monday in North American trading. The British pound also gained, up 0.8% to change hands at USD1.6320.

Meanwhile, the dollar traded at JPY91.32, down slightly from JPY91.43 on Friday.

Market expectation

The FOMC begins its two-day meeting Tuesday, and is expected Wednesday to announce whether it will increase ultra-low U.S. interest rates. It is not expected to increase rates.

These interest rates have weighed on the dollar in recent months, especially as world equity markets have rallied and higher-yielding currencies have ridden the wave of rising stocks, taking the wind out of the safe-haven dollar’s sails. Even though U.S. stocks briefly paused their rally Monday, if they follow the lead of most Asian and European bourses and open higher, the dollar is likely to continue getting battered, analysts said.

EURUSD slipping again allows euro to retest toward earlier high around USD1.4821, testing strength of earlier reported supply related to a digital expiry at USD1.4825 and where German name selling was said to have reversed the tide. Offers remain USD1.4820/30 area though some small stops are now mentioned in that area as well. Euro last at USD1.4805.

EURGBP pressing up against reported resistance at stg0.9070, after rate failed to extend the earlier corrective pullback through support at stg0.9045/40. Above stg0.9070 to open a move back toward earlier highs around stg0.9082, with offers noted from here, extending toward stg0.9090. More offers noted at stg0.9100, with further interest dotted to stg0.9115.

USDJPY low print was JPY90.98 on the last dip lower, pair absorbing bids to JPY91.00 but not extending far enough to do much damage to any nearby stops. Stops noted earlier sub JPY90.90, larger sub JPY90.70.

Movers & Shakers:

Important levels:

Source: Dukascopy