Currency Markets – Trading Yesterday & Overnight
The euro rose slightly against the yen and dollar in quiet Asian trading Friday as regional stocks ticked up, encouraging speculators to buy back riskier currencies such as the European currency. However many traders were suggesting last night that the gains seen in the euro were too small to be meaningful, and as a result most currency players were staying on the sidelines ahead of the weekend. Even so, some investors took a cue from rising Asian stocks to buy the euro against the less risky but lower yielding Japanese yen and US dollar, with the euro climbing a third of a yen to 134.55 from New York overnight, while gaining a third of a cent against the US Dollar to trade at 1.3921.
On Thursday, the euro vs dollar maintained an almost perfect sideways trading range, oscillating between 1.3900 and 1.4000,during the European trading session. The better than expected Philly Fed survey pushed stocks higher with the euro vs usd testing offers in the 1.40 price area. However, there was no follow through, and the pair gave up much of its gains later in the session despite stocks holding up well, with the pair dropping temporarily below the 1.39 mark.
In the UK, the British pound fell against the dollar and hit a one week low against the euro, after data showed UK retail sales unexpectedly fell, raising doubts about the ‘hoped for’ economic recovery. In recent weeks sterling had surged on expectations that the UK economy would quickly emerge from its deepest recession in decades, however yesterday’s data raised severe doubts, with UK retail sales falling 0.6% in May, against a forecast of a 0.4% gain, 1.6% lower than last May.
The Canadian dollar edged higher against the U.S. dollar after domestic inflation data showed annual inflation slowed in May but was still higher than market expectations.
The Australian dollar enjoyed a boost in Asia Friday, helped by an improved risk appetite and weaker U.S. dollar, while interest rate futures plunged on rising oversupply concerns.
Currency Markets – Trading Outlook This Morning
The euro is slightly higher against the dollar, yen and pound on Friday as markets see a slight up tick in willingness to build exposure to risk. Currency traders are suggesting that the major currency pairs are showing some flows into risk exposure after surprisingly strong U.S. economic news raised hopes that the economic recovery may be taking root in America. The single currency’s short term outlook rests on events next week, such as the two day Federal Open Market Committee meeting starting on Tuesday and the release of key U.S. economic data later in the week. If these numbers are weaker than expected, boosting demand for safe currencies like the US dollar and the yen, then the euro could fall to 130.00 against the yen, and to 1.3700 against the US dollar in the near-term. According to many traders, there is now a feeling in the market that the euro is indeed overbought, and therefore vulnerable to profit taking.
For the euro dollar, traders are reporting decent offers placed towards 1.3950 (USD1.3952 61.8% USD1.4002/1.3872), with the rate currently trading around the 1.3916 region. Stops noted through USD1.3955, which if triggered could open a move toward USD1.3970/75 ahead of a stronger area above 1.4000. Support is seen at 1.3910/00, and a break below could open a deeper move back toward overnight Asian lows at USD1.3883 with bids noted from this level extending toward the NY base at 1.3872.
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