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Morning Forex Overview

By:

Dukascopy

2008-18-12

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Previous session overview

On Wednesday, the dollar was sold off sharply versus all its major rivals as investors concluded there was little reason to hold the currency after the Fed lowered rates to zero and took other measures.

The Euro rallied for the fifth day accelerating to the biggest intraday gain in the EURO's history. EURUSD closed the session at 1.4419 compared to 1.4002 on Tuesday. Since the end of October, the EURUSD pair has developed a consolidation pattern between 1.2330 and 1.3294.

Pound lifted off early Asian lows of USD1.5490, as the dollar came under renewed pressure, the move up aided by EURGBP extending its corrective pullback off Wednesday's highs of stg0.9325, trading to a low of stg0.9249. Cable traded to an eventual high of USD1.5615, the move seen trailing EURUSD stronger rally extension, with the reversal off highs gaining momentum as euro-sterling picked up fresh demand. Cable dropped back to USD1.5490, recovering to USD1.5565 ahead of the European open.

The Japanese yen rally accelerated against the British pound, US dollar, Canadian dollar, and Australian dollar on Wednesday, increasing the risks that it's only a matter of time before the Bank of Japan steps in to intervene.

The Canadian dollar continues to strengthen as oil and gold rise after yesterday's US benchmark rate was slashed to near zero.

The Australian dollar held above USD0.70 near a two-month high late Thursday as the greenback's status as a safe haven asset was brought further into question.

Market expectation

The euro is slightly higher against the dollar Thursday, while both are rebounding against the yen as traders took some profit from the yen's recent run higher. Range trading is likely for the rest of Thursday's session.

EURUSD pullback extends to USD1.4347, but reported demand placed around the USD1.4350 area able to cushion the move on the initial challenge. Rate currently trades back around USD1.4380. Offers now seen placed toward USD1.4400, with interest extending to USD1.4410. A break and clear below USD1.4350 to open a move on toward USD1.4310/00.

The greenback is getting a bid ahead of the European one, led by USDJPY rallying to a session high at JPY88.01. The pair is currently trading at JPY87.98, with offers at JPY88.05/10 likely to be tested. The pair began to bounce early in the session after Japan official jawboning.

Cable currently trades around USD1.5440, with euro-sterling holding around stg0.9315. Cable support noted between USD1.5410/00, more at USD1.5380. Offers placed at USD1.5490/00, stronger toward USD1.5420.

The U.S. Philadelphia Federal Reserve's manufacturing index for December is due later Thursday. Economists expect the index's business activity reading to have fallen to -40 from -39.3 in November. This could give some direction to foreign exchange markets.

Most important events of the day

Date	Time:GMT	Currency	Indicator	Forecast	Prior
2008-12-18	00:30	AUD	RBA Monthly Bulletin
2008-12-18	02:00	NZD	NBNZ Business Confidence		-43.0
2008-12-18	07:15	CHF	Trade Balance	1.70B	1.95B
2008-12-18	08:15	CHF	Retail Sales y/y	1.9%	6.4%
2008-12-18	09:00	EUR	Italian Unemployment Rate	7.0%	6.8%
2008-12-18	09:00	EUR	German Ifo Business Climate	84.0	85.8
2008-12-18	09:30	GBP	Prelim M4 Money Supply m/m	2.0%	2.8%
2008-12-18	09:30	GBP	Public Sector Net Borrowing	13.5B	1.4B
2008-12-18	09:30	GBP	Retail Sales m/m	-0.6%	-0.1%
2008-12-18	10:00	EUR	Trade Balance	-5.2B	-5.7B
2008-12-18	13:30	CAD	Core Retail Sales m/m	-0.9%	0.8%
2008-12-18	13:30	CAD	Foreign Securities Purchases	-1.00B	-0.27B
2008-12-18	13:30	CAD	Retail Sales m/m	-1.0%	1.1%
2008-12-18	13:30	CAD	Leading Index m/m	-0.4%	-0.4%
2008-12-18	13:30	USD	Unemployment Claims	558K	573K
2008-12-18	15:00	USD	CB Leading Index m/m	-0.5%	-0.8%
2008-12-18	15:00	USD	Philly Fed Manufacturing Index	-40.0	-39.3
2008-12-18	15:35	USD	Natural Gas Storage	-112B	-67B
2008-12-18	18:30	USD	FOMC Member Fisher Speaks
2008-12-18	21:45	NZD	Visitor Arrivals m/m		0.7%
2008-12-18	23:50	JPY	All Industries Activity m/m	-0.8%	-0.1%

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