Previous Currency Market Summary
The Euro edged up slightly against the USD & JPY Tokyo Thursday as Asian traders bought on the overnight fall in New York. However, traders also aware that the risk sensitive currency could resume its decline if global share markets remain weak later in the day. In the early Thursday trade, traders bargain hunted the Euro following its overnight slide to the lowest levels against the USD & JPY in two and one week respectively. The relatively cheap Euro was apparently particularly attractive for month end position squaring.
The Euro was a large mover with a relief rally in Asia being sold for the rest of the day for a test of USD1.4000 which managed to hold firm. The fall from USD1.4300 has been brutal for Euro longs and could induce more selling on rallies as longs try to bailout. Investor sentiment was key in getting the Euro higher so if stocks fall then that support may slip.
The British pound fell against the USD as a 7% drop in the Shanghai Composite Index prompted investors to shy away from riskier assets. In addition, official data showed that British financial institutions lent less money to households last month than at any time in the past 15 years. Cable slid to as low as USD1.6346 in the European morning session before rebounding.
The Aussie Dollar dragged itself higher in Asian trade Thursday and could enjoy further gains offshore if stock markets tick higher while bond futures continue to suffer from an ever improving economic outlook.
Forex Market Expectation
The Euro is responding to some buying interest around the USD1.4000 level Thursday and could find even further long position interest below that level, although scalping for quick profits appears to be the order of the day. Cable too is seeing a degree of speculation as both sides battle it out as the rate rebounds back towards USD1.65 and may continue higher if European equities open higher and investors ignore the fall in the Shanghai Composite and decide to focus on any sign that the global recession may be coming to an end.
EURUSD has eased off highs ahead of the European open, as traders note that the USD1.4085 price point holds the strike of a decent size expiry for today’s 14.00GMT cut. Once above this level the rate could push towards USD1.4120/25. However, support at 1.4010/00 must hold otherwise we could see a deeper move back towards USD1.3965/60.
The remainder of this week will see traders and investors watching Asian share markets (particularly the Shanghai Composite) which back in 2007 was the first to herald the start of the current financial meltdown and may once again be the harbinger of some very bad news.
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