Currency Markets – Yesterday & Overnight

The dollar made slight gains against the euro and was steady against the yen in Asian trading Thursday, sticking to narrow ranges ahead of key U.S. jobs data later in the global day. The dollar was trading at JPY96.60, just a single tick above JPY96.59 in late North American trading on Wednesday. Earlier in the day, the U.K.’s Daily Telegraph newspaper reported that Russian banks may need to raise USD60 billion in fresh capital to cover an increasing number of bad loans, citing a Fitch Ratings analyst.

Yesterday, the Euro tested USD1.4000 but managed to shrug off heavy pound vs dollar falls post the dreadful GDP data. EU inflation fell 0.1% y/y in June, whilst German Unemployment rose to 8.3% as expected. The Euro found good buying interest as China purchasing mangers’ index for June rose to 53.2 from 53.1 in May, consolidating the fourth month in a row above the watershed mark of 50.

The British pound fell against the dollar after the previous day’s unexpectedly sharp downward revision to UK GDP continued to hamper the currency. The purchasing managers index rose to 47.0 in June from 45.4 in May. The UK also recorded a bigger than expected current account deficit of GBP8.540 billion in the first quarter.

The Canadian dollar strengthened against the dollar as crude oil prices rebounded back above USD71 per barrel, helping the commodity-linked currency. The Australian dollar was marginally stronger in Asian trade late Thursday as support provided by stronger equities performance was eroded by a wider than expected blowout in the trade deficit. The currency is now close to the middle of the recent range it has held in past weeks and is expected to tread water ahead of the release of the U.S. non-farm payrolls data for June later Thursday.

Currency Market Outlook Today

With the market remaining bearish on the euro, it may decline further in the thin flow market ahead of the three day weekend in the U.S. that starts with Independence Day on Friday. The Australian dollar and the euro are what some players call “riskier currencies” and they tend to move in the same direction against the dollar.

Euro sterling, which had been correcting away from its New York high at 0.8596 through the Asian session, easing from stg0.8586 to stg0.8565, spiked higher to make a brief show above 0.8600, touching 0.8601 before easing back to currently trade around 0.8588. This move may allow cable to recover back to current levels around USD1.6440, but is expected to meet resistance on the approach to 1.6450. A break above here may open a move back to USD1.6480 ahead of a stronger area around 1.6500. Support remains in place at USD1.6410/00.

The euro vs dollar is adding to earlier reports of demand placed between 1.4100/80, trader’s note that stops are building in the area between USD1.4080/70. Further demand is seen placed toward USD1.4050 with reports of more stops below.

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Previous Currency Market Session Summary

The Dollar rose to near two week high against the Japanese Yen reaching JPY97.00 in Tokyo Wednesday as Asian traders followed US players in dumping Euros and Yen for Dollars.  In stretching towards JPY97.00 buying order were triggered at JPY96.50.   Market focus with US Employment Data muted any impact from the Bank of Japan’s Tankan Survey which showed sentiment amongst large manufacturers not improving as much as expected.

The Euro gave up its early gains, shedding over 1.5 cents from highs at USD1.4150 following the release of US economic data.  Traders and investors remain cautious as they await the European Central Bank meeting and unemployment data due Thursday.

British Pound experienced a volatile session trading as it reached a new high for 2009 supported by a report that UK housing prices rose slightly in June.  However, Cable collapsed in reaction to confirmation that UK Q1 GDP contracted at its fastest in 51 years.

The Canadian dollar dipped against the US dollar following the release of Canadian GDP.  GDP fell -0.1% in April,  the 9th straight month of declines.

Weakness in global stock markets and poor domestic housing data triggered selling in the Australian dollar in the Asian session late Wednesday. Trade in the currency is likely to be choppy as it negotiates an obstacle course of key economic data, both domestic and offshore, in the next few trading sessions.

Currency Market Expectation

Although the Euro is little changed against the US Dollar it will face selling orders around USD1.4150 but both currencies are gaining against the Japanese Yen while Cable is mired in ranges against the majors.  Traders appear to be returning to the safe haven of the US Dollar in advance of June US employment data.

Ahead of this data the US currency is likely to remain stuck in a narrow range capped at around JPY97 for the rest of the day.

European stocks are expected to open higher Wednesday, with investors determined to start the new month and quarter looking for bargains after Tuesday’s sell off.

For the euro vs dollar any break at USD1.3900/80 could allow for a deeper move towards USD1.3970 and with resistance at USD1.4045/60 (USD1.4058 38.2% USD1.4153/1.4000) any break above would open a move towards USD1.4090/00 (USD1.4095 61.8%) ahead of USD1.4120.

The UK Pound is dropping to a low of USD1.6383 (USD1.6384 38.2% USD1.5800/1.6745) although the rate has since recovered. Any break of the USD1.6425 price level may open a move toward USD1.6445/50.  Below USD1.6380 the rate can extend downwards toward USD1.6350.

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.