Previous Currency Market Session Overview
The Euro rose against both the USD and Yen in Tokyo Friday following a rebound in regional equity markets prompted players to buy the risk sensitive common currency, though any gains are likely to be limited ahead of the weekend. Stronger equities calmed investors’ nerves, frayed earlier in the week by the sharpest fall in Chinese stocks since November.
The USD was down slightly against the Yen, trading hands at JPY95.34 at 0450 GMT compared with JPY95.50 late Thursday in New York. Selling orders from Japanese exporters for month end settlements were likely to keep a lid on any rises during Tokyo trade, with resistance around JPY95.60.
The Euro rebounded strongly against the USD, going as high as USD1.4096 on Thursday from a two-week low of USD1.4007 formed in the previous day as a surge in global stock markets encouraged investors to become more risk aggressive. In addition, German unemployment unexpectedly dropped in July by 6,000 and jobless rate held steady at 8.3 percent – investors taking this as a positive despite the fact that the numbers do not include the 30k jobless enrolled on government sponsored training programmes or the extensive use of government subsidies to companies to keep staff on shortened hours.
The British Pound rose too against the Dollar on reports that UK house prices had climbed in July, for a third month in a row, suggestive of improvements in the economy & analysts now calling a bottom in this sector.
A more positive risk tone and firmer regional equities also helped the Aussie Dollar to climb higher in Asia trading Friday ahead of a slew of top tier domestic data and fresh central bank growth forecasts scheduled for release next week.
Forex Market Expectation
Fresh demand into early Europe lifts EURUSD back to retest overnight highs, extending to USD1.4140 but falling back at writing, as traders square positions ahead of month end and expectation of USD sales, so expect some strong two way action.
Sterling is expected to be a main beneficiary of end month fix interest (along with the CommDollars – Aussie and Cad). Offers now seen placed toward USD1.6585, with further interest noted from this level to USD1.6600. Support seen placed at USD1.6525/20, USD1.6485/80.
Key fundamental data today includes US Q2 GDP data which will be in focus this afternoon for determining risk positions into the weekend. Eurozone unemployment rate & GDP month on month figure for Canada. European stock markets are expected to open a tad lower Friday amid caution as the focus lies squarely on economic data, and in particular the US second quarter GDP release, and what this indicates about the economic slowdown as analysts expect the data to show the US economy contracted by 1.5% in annualized terms in the April-June period. Anything weaker could be a boon for the JPY. However, even if equity markets in Europe and US do gain the Euro is unlikely to extend its recent highs ahead of the weekend.
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