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Overall, the dollar index broke below the 78.00 area, reaching the lowest value of the current year, as S&P futures and crude oil provided a strong boost for the major pairs during the European session. Market momentum was somehow lighter than usual, but still the Australian dollar, the British pound and the Canadian dollar reached the highest value against the dollar in recent trade.
On the other side, the euro and the swissy appeared very reluctant initially to advance, but eventually the rest of the market pulled them higher, something that shows that the euro and the swissy might be in an consolidation phase, and more easily able to reverse than other pairs. Ahead, the forex market will probably continue to be driven by S&P futures, but this relationship will get tested during the 10:00 EDT ISM Manufacturing PMI report from the U.S.
The euro (EUR/USD) traded around the 1.4260 area during the overnight session, failing to move decisively in any direction. However, by the middle of the European session the euro was pulled higher, managing to break above the high set on Friday. For now, the euro is trading slightly below the high of the current year at 1.4300, reached in June, but the market will need much stronger momentum to break above it.
The pound (GBP/USD) gave signals initially it wants to break below the range set during the Asian session, but the pair turned around shortly after the London open and surged nearly 150 pips. The uptrend was further empowered during the European session, when the PMI report showed that the manufacturing side of the economy expanded for the first time in a little more than a year. Helped by these gains, the pound reached the highest value of 2009, at 1.6875.
The aussie (AUD/USD) is trading at the highest value it has been since late September 2008, as the pair gained 50 pips during the overnight session. The Australian dollar is full of surrounded by a positive momentum, as the Australian economy is among the only ones that managed to avoid a recession. Moreover, the RBA is currently paying a 3% yield overnight, substantially more than the Fed’s 0.25%. Ahead of the interest rate decision at 00:30 EDT on Tuesday, the pair is trading at 0.8400.
The cad (USD/CAD) reached 10-months low of 1.0700 during the European session, helped by the gains in S&P futures trade, and in moves higher by the global commodity market. Over the last few weeks of trading, the cad was among the only pairs that managed to develop and sustain a trend, as investors are price in a stronger rebound by the Canadian economy, especially driven by commodity exports.
The swissy (USD/CHF) had no clear direction during the overnight session. The pair tried to break lower throughout the Asian trading hours, but failed to break through the 1.0650 area. During the European session, the swissy spent most of the time struggling to break above the 1.0700 area, but so far, it has failed to sustain any momentum, either way.
The yen (USD/JPY) saw a 20-pip range during the early Asian session, but as the market headed towards the London open the pair moved higher by 40 pips, testing the 200-day moving average, which acted as a major swing point lately at 95.20. In order for the yen to develop and sustain a trend, the pair would have first to break free from the heavy resistance just above, and hold for the day.