Previous Forex Session Summary

The USD is broadly higher Wednesday morning following a weak performance by Chinese stocks contributing to a waning appetite for riskier assets.  Although it had retreated somewhat from its overnight gains as NY trading progressed, the Dollar showed little response to news of weaker than expected US durable goods orders for June.  According to the Commerce Department manufacturers’ orders for durable goods decreased 2.5% last month to a seasonally adjusted USD158.57 billion.  The 2.5% fall represented weaker demand for cars, planes and computers whereas analysts had been expecting a fall of only 0.6%.  In addition the May orders were also revised downwards from 1.8% to 1.3%. Thus the markets’ primary focus remained firmly on the re-emergence of risk aversion which first surfaced on Tuesday and gained momentum during Asian trading session Wednesday.

Euro bought USD1.4103, down from USD1.4160 late Tuesday, after briefly slipping to a new low for the day at USD1.4086 in the wake of the above data.  The British pound bought USD1.6384, down from USD1.6433.  Overnight selling in the pound took the rate down to USD1.6350, but it has since rallied back to the USD1.6450 level.  A UK report of net lending to individuals posted a record low.

Forex Market Expectations

Dow Jones Futures are lower in early New York trading keeping pressure on the USD to the upside and with a raft of US data due this morning it appears that traders are favouring the long side of the USD into mid-week.

EURGBP rate falls below stg0.8570, the move triggering stops for rate to extend lows to stg0.8562. Rate currently trades around stg0.8573.

USDJPY stalled again at JPY95.00 area as the 200 day moving average continues to influence and selling emerges ahead of JPY95.10 European hours high.  Talk now emerging, perhaps unsurprisingly, of stops above JPY95.20.

Some banks are now forecasting the USD to rise to 100 Yen by the end of the third quarter of 2009, compared with a previous estimate of 105 yen.  They are also predicting 105 Yen by the end of the 4th quarter, down from a previous of 110 Yen.  They then expect the rate to achieve 110 by end of Q1 2010 (down from 112) – signs of goalposts being shifted.

EURUSD getting batted lower again to trade at USD1.4075 area and with month end (and summer holidays beckoning) this drift lower will no doubt cause a certain amount of feverish activity.

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Previous Forex Trading Session Summary

Knee-jerk selling on a reported car bomb blast in Spain has been cited as adding to the Euro’s weak tone against the JPY in Asia Wednesday, along with a wave of Euro denominated bond redemptions due tomorrow.  The Euro fell to JPY133.39 from JPY133.75 and to USD1.4160 from USD1.4180.

Meanwhile the USD also fell against the JPY on the back of the worse than expected result of the two year Treasury auction causing market jitters about the fiscal health of the US.  The Euro had hit a high of USD1.4305 in the European morning session but it later tumbled to USD1.4130 following release of US consumer confidence index for July which came in worse than expected at 46.6 against a forecast of 49.0 and a reading of 49.3 in June.  The data suggesting that signs of recovery in the US are at best mixed and, at worse, extremely fragile and vulnerable owing to a difficult labour market.

The UK pound also fell against the USD as negative fundamental news pushed investors into safe haven currencies with the CBI monthly survey of retail sales indicating that a majority of retailers are foreseeing lower sales in the near future.

The Aussie Dollar fell sharply in Asia Wednesday, trading off softer regional equities and a weaker Euro, and a further test of key support levels is highly likely.  The Aussie Dollar is also vulnerable to a move lower on the back of any sudden swing away from riskier assets and profit taking.

Forex Market Expectations

The JPY is gaining on the UK pound, Euro and US dollar Wednesday, as investors take a breather from the stock markets.  Euro selling has been most likely sparked by speculation along with the expected Euro bond redemptions as traders adjusted positions and may be short lived.

EURUSD extended lows to USD1.4110 and traders now watching the USD1.4100 support which, if breached, could trigger a deeper move lower.  European stock markets are seen opening modestly higher Wednesday, as investors regain their poise after Tuesday’s consolidation which brought the run of equity gains to a grinding halt.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.