Previous session overview
On Wednesday, the dollar was moderately stronger against key rivals, riding piggy-back to firmer U.S. stock markets and a growing sense that the worst of the U.S. financial crisis has passed.
The US dollar extended its gains against every major currency. Softer consumer prices have failed to stifle the dollar's recovery as the market wonders how much longer producers will be able to bear the brunt of higher prices. Core prices increased by only 0.1 percent last month while headline prices increased 0.2 percent.
Big swings have been happening across the currency market but unfortunately the Euro has been left out of the action. Since the beginning of the month, the currency pair has been trapped within a tight range and that range contracted to less than 100 pips yesterday. EURUSD traded with a low of 1.5397 and a high of 1.5486 before closing the day at 1.5457 in the New York session.
The U.K. pound dropped to its lowest level in nearly four months versus the dollar Wednesday, after the Bank of England acknowledged a stagflationary predicament. GBPUSD traded with a low of 1.9366 and a high of 1.9473 before closing the day at .9439 in the New York session.
The Japanese yen weakened against its U.S. counterpart despite a release showing Japan's corporate goods price index rose 3.7 percent in April, prompting officials to start to consider a rate hike in Japan. USDJPY traded with a low of 104.58 and a high of 105.44 before closing the day at 105.26 in the New York session.
The Canadian dollar hit parity as oil prices continued to climb to record levels topping USD127 a barrel. With no Canadian data due out today, the market will look towards Canada's survey of manufacturing due out tomorrow.
The Australian dollar was weaker Thursday after a slump in New Zealand retail sales spurred a bout of profit taking in high yielding currencies.
Market expectation
EURUSD pulled back from early highs of USD1.5541 to USD1.5515, getting another lift from release of better than expected French GDP Q1 data. Rate edges back above USD1.5530 and looking set to retest the earlier mentioned high, with offers remaining in place between USD1.5540/50.
AUD - RBA Gov Stevens is scheduled to speak at 1030 GMT, where he is widely expected to discuss the State of the Australian Economy in its current climate, and its history in recent decades. The markets will punish the Aussie dollar when there is no upside momentum. Expects support at 0.9250, resistance at 0.9410, pair now 0.9323, recovering from early lows after bout of profit-taking.
USDJPY falls below initial support of 104.70, marking session low of 104.57 which also yesterday's low; may risk further declines as USD-selling pressure from rising EURUSD. Trading in Asian hours was very quiet, but with European economic growth data coming out, European players will probably become much more active.
A heavy data day is scheduled out of the US today with TIC flows, Philly Fed, whilst Fed Chairman Bernanke is scheduled to speak on Credit Market Turmoil in Chicago. Look for the greenback to remain range bound against its major counterparts ahead of the Philly Fed. manufacturing survey and consumer sentiment on Friday.