Morning Forex Overview

Previous session overview

The euro ticked up against the yen in Asia Wednesday, as Japanese importers buying the single currency on a regular settlement day set the tone of the market amid a lack of other trading cues.

But further gains are far from certain, dealers said, with the euro’s near-term direction resting on developments in the euro-zone’s fiscal problem and upcoming economic data.

As of 0450 GMT, the euro stood at JPY122.44, slightly up from JPY122.36 in New York late Tuesday.

The Euro slumped in Europe through the USD1.3600 level on heavy EURJPY selling but the downside pressure did not last and the single currency finished at the USD1.3600 level. EURGBP continued to grind higher as the Pound suffered the most of the majors.

The British pound fell as Fitch Ratings also said that the UK needs to improve its fiscal policy and Moody’s said that the financial-strength ratings of UK banks haven’t improved. The RICS house price balance report from yesterday also continued to weigh on the Pound. The report showed that the number of real-estate agents and surveyors saying house prices rose exceeded those reporting declines by 17%, much lower than forecasts at 30%.

Higher metals prices pushed up the Australian dollar Wednesday as dealers wait all important employment numbers Thursday. Aside from gains against the U.S. dollar, the Australian unit set a fresh record against the euro and is at its highest against the pound since it was floated.

Market expectation

The euro is higher against the pound, as concern about the U.K.’s fiscal problems reverberates. However, concerns about similar problems in Portugal keep the lid on the euro’s gains.

While temporary swings in risk appetite will continue to benefit the euro, the common currency is vulnerable because of concerns about the sovereign debt of several euro-zone countries.

EURUSD breaks below support at USD1.3560 to extend lows to USD1.3550 with rate retaining a heavy feel, traders suggest. Support seen at Tuesday’s lows at USD1.3537, with demand said to extend toward USD1.3530.

Pound grinds its way down to USD1.4910, with tone remaining heavy as recovery efforts seen shallow. A break below USD1.4900 may expose USD1.4880. Level expected to draw demand as it corresponds to a 76.4% retrace of the recovery from recent lows at USD1.4781 to USD1.5197. Traders confirm that stops are placed on a break below.

European stocks are expected to open little changed following Wall Street’s modest rebound in the previous session, while the major currencies are trading within tight ranges.

Most players are bearish toward the euro, better than expected economic data could help restore investor confidence, possibly buoying the risk-sensitive euro toward USD1.3700 and JPY123.50, some dealers said. Investors will monitor U.S. retail sales for February and Reuters/University Of Michigan Consumer Sentiment Survey for March, both due Friday, for any hints on the health of the global economy.

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