Dukascopy Daily Forex Overview

Dukascopy analytic desk report
Published: 12 May 2008 at 06.58 GMT

Previous session overview

On Friday, the dollar declined against the euro and yen on a resurgence of risk aversion after the credit crunch struck AIG's earnings and oil continued to set record highs.

The euro held its ground despite the release of better-than-expected figures out of the U.S and on the back of the European Central Bank's (ECB) decision yesterday to hold rates at 4 percent. EURUSD traded with a low of 1.5394 and a high of 1.5489 before closing the day at 1.5479 in the New York session.

The Sterling eased against a number of majors on signs that the faltering economy would prompt the Bank of England to resume it easing cycle. U.K. home repossession claims by mortgage lenders rose 16 percent from a year ago to the highest since the early 1990s.GBPUSD traded with a low of 1.9461 and a high of 1.9598 before closing the day at 1.5479 in the New York session.

The Japanese yen continued to push higher against the dollar despite the release of a lackluster leading economic report. The leading economic indicator for Japan came in at 20 in line with expectations, but much lower than previous releases. USDJPY traded with a low of 102.62 and a high of 103.96 before closing the day at 102.93 in the New York session.

The Canadian dollar pushed higher after a report released sighting that more domestic jobs were created in the month of April than initially predicted.

The Australian Dollar was range bound and held firm on sturdy commodities, despite falling equities.

Market expectation

Now, currency analysts say the euro is likely headed back up against the greenback.

The euro is lower against the dollar on Monday, while both are higher against the yen. But it's premature to suggest the USD has turned around and is set for a big recovery. The next levels for resistance for the euro are USD1.5440 and USD1.5570.

Japanese importers' buying of USD prompt other investors to cover their USD-short positions. Players are somewhat bearish on the dollar, but there aren't enough trading factors to push it lower actively.

AUDUSD weakness driven by soft data prints, USD strength and fall in global risk appetite. Expect support for pair around 0.9350 with firmer historic support at 0.9280.Weaker-than-expected housing finance data, lowest National Australia Business Confidence index since Sep. 2001 adding to picture of slower demand.

Locally, the main event this week is the retail sales figures for March (Thursday). Electronic card transactions point to a small fall for the month, continuing the weak trend. However, general price increases over the March quarter were not as high as for fuel and food, meaning that at least some of the nominal growth in spending in Q1 was due to a rise in volumes - we expect a 0.4% gain for the quarter.

US economic data bring some mixed signals and we'll have to wait and see how the moves are translated and if the Dollar can keep its new found foothold.

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