Dukascopy Morning Forex Overview

Previous session overview

On Tuesday, the euro declined against the dollar as U.S. equities continued to slide in thin market trading.

The euro fell to a two-week low four hours later at USD1.2507. The euro also fell to a two-week low against the yen to JPY121.84. European currencies have been trading as a proxy for risk sentiment recently, declining with each blow to U.S. stocks as traders exit positions back into the safer U.S. currency.

The euro fell sharply at the start of the US trading session thanks following the release of less-than-impressive data out of the Euro-zone. Against the U.S. dollar, the euro fell earlier to a two-week low at 1.2507 and traded down 1.6 % at 1.2535.

The US dollar gained nearly 1.5 percent versus the British pound. Sand Pound fell to a record low against the euro at 0.8215 as U.K. home sales declined to the lowest in at least three decades, raising market's concerns that the U.K. economy will suffer even more than the euro zone.  

Due to sell-off in stock markets worldwide risk aversion boosted demand for the Japanese yen versus other high-yielding currencies. The dollar last traded down 0.3 % at 97.68 yen.

Aggressive pricing for interest rate cuts, weaker regional equities and thin trading conditions pushed shorter-dated Australian interest rate futures to record highs Wednesday, while the Australian dollar weakened.

Market expectation

The euro is rebounding Wednesday as stock markets pare early losses, swinging sentiment back to easing risk aversion, several traders said. Commercial demand for euro also helped. But the traders added that euro's downtrend is not at all over and EURUSD have risks of falling below USD1.2450 through European trading.

EURUSD extending the rally into European dealing, pressing up above USD1.2630 at time of writing as EURJPY continues to force its way higher. Light offers now noted in the USD1.2650 area with Technical analysts seeing near-term resistance at USD1.2663. A break would expose a potential steeper move towards yesterday's US highs in the USD1.2750 area, traders say.

Early European dealing has seen the move of USDJPY extended as the rate pushes back on to a JPY98 handle, with offers in the JPY98.30 area now coming into play, while  Technical analysts see resistance at JPY98.41 (21-day moving average). On the downside, light bids are seen into JPY97.50, with a break of the Asian lows seen exposing demand placed around last week's base at JPY96.80.

Most important events of the day