Dukascopy Morning Forex Overview – Sept 25 09

Previous session overview

The yen rose against the dollar and the euro in Asia Friday, as Japanese exporters repatriated profits while speculators pushed the yen to a four month high against the British pound on speculation that the U.K. is comfortable with a weak currency.

Cross-trading pressure from the pound’s weakness against the yen also caused the U.K. currency to hit a three-and-a-half-month low against the dollar.

The euro remains little changed after hitting a fresh overnight high vs. the dollar.

Data from the Euro zone Flash Services Purchasing Managers Index climbed to 50.6 in September, its highest level since May 2008, but the Euro zone Flash manufacturing index missed expectations by coming in at 49.0. Data from the European Union’s statistics office reported industrial orders in the Euro zone rose 2.6% against June.

Sterling tumbled more than JPY2 to JPY144.34, its lowest level since May 18, dealers said, while the U.K. currency also touched JPY1.5915 against the U.S. dollar, its lowest level since June 8.

The pound remains under pressure after Bank of England Governor Mervyn King said in a recent newspaper interview that the currency’s weakness was “helpful” to the process of rebalancing the U.K. economy, traders said.

The greenback declined three-fourths of a yen from where it stood in New York late Thursday to JPY90.56, before recovering to around JPY90.70.

The Australian dollar traded lower on Friday but ended the session firmly supported on reports of comments out of the Group of 20 industrial nations meeting in Pittsburgh that there would be no premature removal of economic stimulus.

Market expectation

The euro, U.S. dollar and U.K. pound are falling against the yen on Friday on selling by Japan’s exporters as well as hedge funds. But some dealers are looking for a short-term technical bounce in the pound before perhaps declining more next week.

Dealers maintained that the U.S. currency could reach a January low of JPY87.10 in the coming days given its broad weakness.

For EURUSD offers remain in place at USD1.4700, more toward USD1.4720 with stops placed above. Bids remain between USD1.4620/00 with stops below (suggestion area holds sovereign interest and draws front running demand with stops placed under the figure). A break may open potential for a move down to USD1.4515 with area between USD1.4560/45 to provide interim support.

European stocks are expected to open up Friday, after Asian equity markets came off their lows and S&P 500 futures rallied.

Traders will closely watch U.S. economic indicators due later in the global day, including durable goods orders and new home sales for August, to see if their pessimism toward the dollar is warranted. The focus is also on what the Group of 20 leaders will decide in their two-day summit ending Friday.

Movers & Shakers:

Important levels:

Source: Dukascopy