Previous Currency Market Summary

The US Dollar is broadly higher Monday morning as it advances against all the major currencies except the Japanese Yen in response to a more risk averse mood in markets.  Uncertainty surrounding the outcome of the FOMC statements on Wednesday is adding to the uncertain mood among investors, which is turn weighing on equities and other riskier asset classes.  In addition the statement from the World Bank that it has cut its forecast for the global economy in 2009 together with escalating political tensions in Iran and North Korea are also US Dollar supportive.

With no significant US data releases this Monday, and a relatively light economic calendar, the focus for the market is firmly on the FOMC meeting.  The major currency most under pressure has been the Euro, but Cable too has also suffered, hit by news that UK  house prices have started falling once again.

The dollar is at JPY95.86 from JPY96.23 late Friday. The Euro is down at USD1.3840 from USD1.3948 and at JPY132.69 from JPY134.22. The dollar is up at CHF1.0884 from CHF1.0803, and the British Pound has dipped to USD1.6403 from USD1.6496.

Currency Market Expectations

The market’s focus on this week’s FOMC meeting has intensified as expectations of what the next move will be on US interest rates, with views swinging dramatically from one extreme to the next.    This uncertainty has been fuelled by the Fed’s unconventional QE policy which has left the markets confused about how the Fed can reconcile keeping a low interest rate environment, thereby helping the consumer (and economy) to recover with the need for a stronger Dollar, hence the importance of this week.

EURGBP breaks above reported offers placed between stg0.8435/40 and seen edging toward next reported resistance between stg0.8450/55.  Above here can open a move on toward stg0.8485/90. Support remains in place toward stg0.8400, a break below to open a deeper move towards stg0.8380 ahead of stg0.8355/45.

Cable trading with a bearish bias as the rate is pushed towards earlier lows around USD1.6405.  Rate currently trades around USD1.6380, while EURGBP gets pulled higher by the Eurodollar. USD1.6380 is support ahead of USD1.6360/50.

USDJPY eases back under JPY96.00 area for a look at the overnight low zone at JPY95.80 with a test of demand interest in that area, though flows are described as very light on the day but with Japanese Yen finding favour as risk trades are pared back.

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Previous Currency Trading Session Overview

The Japanese Yen and USD are down against riskier rivals Friday morning after market sentiment picked up on stronger crude oil prices and equities.  However, trading has been both volatile and range bound, indicative of the market’s uncertainty ahead of next week’s Federal Open Market Committee meeting.

Euro’s overnight gains are slipping into the NY morning session and with no significant data release scheduled for today, quiet and volatile trading is likely to prevail in thin market conditions.

Stronger risk appetite on Friday emerged following US Treasury Secretary Timothy Geithner remarks in an interview with PBS (the American Public Broadcasting Service) on Thursday where he said he saw some signs of stability in the economy and healing in the financial system.  Markets must be desperate if they are moved by such anodyne comments.   However, encouraging US data Thursday also helped, including a rise in the CB index and the Philly Fed manufacturing index.

Friday morning in New York, the Euro was at USD1.3913 from USD1.3894 late Thursday, while the USD was at JPY96.83 from JPY96.62. The Euro was at JPY134.69 from JPY134.22. The British Pound was at USD1.6444 from USD1.6341, while the Dollar was at CHF1.0856 from CHF1.0868.

Currency Market Expectation

Analysts say traders are looking for a fresh catalyst, given that it appears that the global recession may be ending even though growth is still some way off.  Possible contenders include next week’s FOMC meeting, US Housing Data, Treasury Auction of USD104bn of 2, 5 and 7 year notes plus a one year refinancing operation by the ECB (European Central Bank).   Market will be particularly sensitive to comments and any loose talk.

Sterling is likely to outperform in the coming weeks, as traders have used the recent decline as opportunity to buy into the market, although cable’s failure to extend recovery though USD1.6480 did at one point see spec longs pare back their positions.  Rate now trading at USD1.6505 after challenging support between USDF1.6425/20. Dips appear to be attracting fresh demand seen attracting fresh demand with rate able to lift on to USD1.6515 at writing with possibility of break to USD1.6520.  Any pullback towards USD1.6420 could allow for a deeper move back towards USD1.6400/1.6390 and further down to USD1.6350/40 and then on to USD1.6305/00.  ROC holding up well.

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.