Dukascopy Morning Forex Overview – Sept 29 09

Previous session overview

The dollar and euro rose against the yen in Asia Tuesday as Japanese importers bought the two currencies to procure natural resources cheaply from overseas, but traders expect the greenback to soon resume falling.

Hedge funds also sold the yen to unwind positions they had accumulated during the currency’s “speedy” rise on Monday. As of 0450 GMT, the dollar stood at JPY89.88 from JPY89.61 in New York Monday.

Some investors speculate the possibility of Japan’s dollar-buying intervention will heighten when the U.S. unit falls below JPY85, because such a level would be harsh for most Japanese exporters.

Meanwhile, rising Japanese share prices pushed the euro up against the dollar and yen. The European currency is one of the most sensitive units to players’ risk tolerance.

The euro dollar pair inclined recording a high of USD1.4645 and a low of USD1.4585, having the union currency trading around USD1.4635. The pair gained after yesterday’s drop that came along with fundamentals showing increasing deflation risks in Germany the largest economy in the euro area as consumer prices fell more than forecasts.

The Pound had seen a low near USD1.5770 yesterday after having broken below USD1.60 on Friday. A small corrective rally towards USD1.61 may be seen this week before fresh sales come in. There is UK GDP data release today.

Stronger stock markets and growing expectations interest rates will be hiked in coming months pushed the Australian dollar higher in Asia on Tuesday and dealers said the rally could extend if top tier data due Wednesday builds the case for tighter policy.

Market expectation

The U.S. dollar, U.K. pound and the euro are higher against the yen, after stop-loss buy orders were triggered at around JPY89.80 versus the dollar.

On Tuesday, however, some dealers were looking for fresh opportunities to short the euro and pound against the yen and dollar.

Whether traders remain in the dollar – which hit a nearly two-week high against the euro during New York trading – or whether they chase higher yields, will depend on the strength of the global economic recovery, analysts said.

Investors are looking especially toward Thursday’s ISM manufacturing PMI and Friday’s U.S. non-farm payroll numbers to determine whether the U.S. economy is inching forward or sputtering, analysts said.

Both numbers are expected to improve, but a disappointing showing for either could throw cold water on the September euro rally, which has stalled in recent sessions as a wave of caution has swept over currency markets.

Meanwhile, investors are watching the Swiss National Bank for signs of intervention to hinder the continued appreciation of the Swiss franc against the euro.

For EURUSD offers noted into the USD1.4650 area, more around USD1.4680. On the downside, bids come in around USD1.4570/60, with traders noting the 21-day moving average as near-term support at USD1.4562. Stops then said to come in below USD1.4550.

In Australia topping watch list are retail sales and building approvals numbers due 0130 GMT, which will provide key updates on the state of demand on the high street and pace of housing supply. The median consensus is for retail sales to have risen 0.5% in August with building approvals up 2.0% in the same month. Any stronger results will boost the local currency.

Movers & Shakers:

Important levels:

Source: Dukascopy