Currency Markets – Yesterday & Overnight Asia
The euro rose against the US dollar and Japanese yen in Asia Friday, as firm Asian stocks and higher crude oil prices led short term investors to buy riskier currencies, such as the euro. Yet according to many currency traders, the single currency’s outlook remains uncertain against other major currencies. It risks falling to 132.00 against the yen, and 1.3850 against the US dollar in the short term, if upcoming U.S. economic data misses forecasts, adding to concern about the global economic outlook and hurting demand for the euro and other relatively risky currencies.
Traders are now suggesting that recent rises in oil prices have been one of the drivers to buying riskier currencies, saying growing demand for petroleum mirrors improvement in the global economy.
The US dollar index lost surprisingly little (-0.2%) given the decent equities performance. The euro dipped to 1.39 yesterday, with minor support during London, and then bounced to 1.40 with Euro zone industrial new orders were weaker than expected. The Swiss National Bank was said to have intervened again, producing only a brief spike in the euro vs chf during the London morning trading session. The British pound fell sharply against the US dollar during European trading, but made some headway in the US trading session thanks to a broad revival in risk appetite. There was no UK economic data on hand, but there were signs of turmoil in the relationship between the UK Chancellor of the Exchequer Alistair Darling and the Bank of England. Firmer risk appetite lifted the Australian dollar in Asia Friday as analysts tipped rising stock markets to continue steering high yield currencies and bond prices offshore.
Currency Markets – Outlook London Session
The euro is rallying against both the dollar and yen in early trading this morning, with many currency traders suggesting that a large British bank has bought the euro on behalf of an Asian central bank. The euro vs dollar eased back ahead of the European open, the correction extending to 1.4025, and currently trading around 1.4058. Offers remain in place at 1.4060/65, a break above here could open a move toward 1.4080 (76.4% USD1.4139/1.3888) ahead of USD1.4100/10 and USD1.4140/50. Bids USD1.4025/20, a break may allow for a move to USD1.4000 ahead of stronger interest at USD1.3985/80 and USD1.3955/50.
For the euro vs pound offers seen placed at 0.8572, a break above to open a move toward 0.8580 ahead of 0.8600. Support is seen placed at 0.8550 ahead of 0.8530/20.
Cable pulled back to 1.6370 ahead of the European open before picking up fresh demand interest which has taken it back to the current level between 1.6425/35. Offers remain in place toward 1.6450, a break above to open a move toward stronger interest placed between 1.6460/70, with a possible re-test of the strong resistance in place at 1.66 longer term. A break above here would open further bullish momentum in the pair. Stops noted through 1.6470/75, which if triggered could open a move toward 1.6500 ahead of stronger area toward USD1.6520.
European stocks are seen opening higher Friday, boosted by expected gains in the heavyweight resources sector, although unlikely to muster similar momentum as U.S. counterparts.
On Friday morning, the Commerce Department is anticipated to say that both personal income and personal spending results for the month of May improved by 0.3 percent. That said, traders should be skeptical of the income result as past increases have been purely the result of rising transfer payments, which include retirement, disability, and employment insurance, while wage and salary compensation has either fallen or stagnated since September 2008.
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