Dukascopy Morning Forex Overview – Oct 1 2009

Previous session overview

The dollar and euro edged up against the yen in Asia Thursday as Japanese institutional investors bought the units to fund overseas investments at the start of the fourth quarter.

But dealers said the buying was moderate, suggesting the currencies would not rise much more against the yen. Other players were hesitant to buy into the rises, they added, due to caution ahead of a closely watched U.S. jobs report Friday.

At 0450 GMT, the dollar stood at JPY89.93, slightly up from JPY89.75 late Wednesday in New York. The euro was also up a tad at JPY131.47 from JPY131.36.

Comments from Federal Reserve officials that investors interpreted to support continued loose monetary policy encouraged risk appetite, despite concern over the sustainability of a U.S. economic turnaround, analysts said.

The Euro strengthened during Europe on strong German Employment Data and intervention from the SNB on the EURCHF. German Unemployment in September was -12k vs. +19k forecast. In the US session some volatility was seen after weak data prompted profit taking.

The Pound rallied hard into Europe on better than expected Consumer Confidence and continued strength on the crosses especially the EURGBP. Large quarter end flows supported. Also helping was the massive rally in Commodities and improvement in risk sentiment.

The Australian dollar retreated from fresh highs in Asia on Thursday, weighed by weaker stock markets, with a risk of further losses offshore if top-tier U.S. data disappoint, traders said.

Market expectation

Euro-dollar dropped from the USD1.4620 area to lows under USD1.4580 initially, with negative German retail sales adding to the heavy tone as the pair slipped towards USD1.4550 in recent trade. Technical analysts are noting the move back below the 21-day moving average at USD1.4594, with a close below for the first time since early September now eyed. Bids are noted into USD1.4550, more around the week’s lows at USD1.4530/25 with stops below.

The euro is likely to continue its upward trend, many analysts said, because of the amount of liquidity sloshing around the market from loose U.S. monetary policy.

Dealers said the dollar’s rise is likely to be short-lived. The currency faced heavy selling bids above JPY90 and would likely not break resistance at JPY93.30.

A separate U.S. jobs report released overnight increased caution, traders said. The September employment report from payroll giant Automatic Data Processing, Inc. showed 254,000 jobs shed during September, more than the 240,000 loss tipped by economists.

If Friday’s payroll report follows suit, with more jobs lost than the 175,000, the dollar could fall against the yen, dealers said.

Movers & Shakers:

Important levels:

Source: Dukascopy