Dukascopy Afternoon Forex Overview – Sept 29 09

Previous session overview

The dollar is holding its modest gains against most of its major rivals early Tuesday, amid an uncertain risk environment and mixed signals from equity markets.

The dollar was bid cautiously higher overnight ahead of some key U.S. housing and consumer confidence data later Tuesday as risk appetites suffered from mixed performances from Asian and European equity markets.

Most of the attention was focused on other currencies and the attempts of various policy-makers to temper speculation about the implications of recent policy and currency moves.

The yen had been support through its recent rally from suggestions that the new administration in Tokyo wouldn’t stop its rise. Tuesday Japanese Finance Minister Hirohisa Fujii said if currency market moves become abnormal, he would “take whatever action” is necessary for the national interest, implying that official government intervention to slow the yen’s ascent hasn’t been ruled out.

Elsewhere, the pound sterling continued to stabilize after last week’s sustained decline, although currency watchers believe the pound’s fleeting comeback is fragile.

After an earlier rally Tuesday, the U.K. unit trimmed some of its gains on caution centering on a meeting between Bank of England officials and local economists. The meeting, which was unassociated with any bank publication, was called so that the Bank could explain its quantitative easing measures, and to reduce speculation about its stance toward the pound and the possibility of future easing measures later this year.

Market expectation

EURUSD has deflated very slightly for trade near USD1.4550 with this pair elbowed out of the spotlight by better action in sterling and sterling crosses on the day, though euro-dollar feeling the weight of euro-sterling sales. Euro “feels bid” under USD1.4550, traders say, but longs get little satisfaction from that trade, euro earlier crushing stops under USD1.4560/50 area for lows at USD1.4538. Flows modest currently but chatter suggesting focus is on downside targets, with talk suggesting better appetite for downside strikes in the option arena also.

USDJPY has orbited JPY90.00 since ahead of the US session with a recent shallow dip to JPY89.85 easily reversed for trade to JPY90.00 again as US Dow stocks recovered from a shallow dip. Yen remains slightly defensive when compared to recent days, Japan finmin Fujii overnight reminding that he has not endorsed a stronger yen and that recent FX moves have been too sharp. Overnight low area around JPY89.63 left bids at JPY89.60 intact with stops below.

EURGBP hovering around earlier lows after the move through stops at stg0.9175/70 in the European morning prompted an extended move to stg0.9104. Some interest to pick up the dip noted at stg0.9100, more around the previous range high in the stg0.9080 area. Rallies back to stg0.9170/75 now expected to attract willing sellers.

Movers & Shakers:

Important levels:

Source: Dukascopy