Thread: Daily FX Market Outlook by AceTrader-29-12-2010

Market Review - 28/12/2010 21:40 GMT

Dollar recovers against Japanese yen, hits record low against Swiss franc

The greenback fell to a 3 1/2-week low of 81.81 against the Japanese yen as yen was supported by robust Japanese economic data. Japanese factory output rose by 1.0% m/m in November, the first time in six months while Japan's retail sales also rose by 1.3% m/m in November, much stronger than economists' forecast of a rise of 0.2%. The pair tumbled from Tokyo high of 82.81 to as low as 81.81 in NY morning, however, price staged a strong rebound as dollar was supported broadly after U.S. bond yields rose following a weak 5-year Treasury note auction. In addition, the dollar fell to a fresh record low of 0.9435 against the Swiss franc as Swiss corporate sold the pair for year-end repatriation.

In other news, Japanese Finance Minister Yoshihiko Noda said foreign exchange moves had been one-sided over the past week and he would be ready to take decisive steps when needed.

The single currency initially rallied on active buying from sovereign names in Asian morning and price extended intra-day rise to a high of 1.3275 in Europe after triggering heavy stops at 1.3200/10, however, euro fell sharply from there as certain big players unloaded euro in NY session. Euro extended its intra-day decline after the release of the S&P/Case-Shiller survey which showed price of American single-family homes fell by 1.0% m/m and 0.8% y/y versus the forecast of -0.6% and -0.1% respectively. Euro nose-dived to 1.3093 in NY session before stabilizing.

The British pound initially rose in tandem with euro to 1.5489 before staging a pullback to 1.5412. Although cable briefly climbed to 1.5514 in Europe, price later nose-dived to 1.5345 in NY before stabilizing.

Economic indicators to be released on Wednesday include:

Germany CPI data and Swiss KOF indicators.

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Market Review - 29/12/2010 21:37 GMT

Dollar falls as strong Treasury demand hits bond yields

The dollar fell to a 7-week low against the Japanese yen after the auction of 7-year Treasury notes was met with strong demand. The solid debt auction provided support to the price of Treasury securities and sent the yields lower, diminishing the appeal of the greenback.

The $29 billion auction of 7-year notes was met with strong demand as indirect bidders, which typically include buying by foreign central banks, took 64.2% of the debt, the highest since June 2009.

The greenback remained under pressure against the Japanese yen throughout Wednesday. The pair fell from 82.45 and penetrated Tuesday's low of 81.81 to as low as 81.61 in late NY trade before stabilizing.

The single currency extended Tuesday's selloff from 1.3275 to 1.3083 at Asian opening before rebounding on short-covering and on talk of possible buying from Asian central banks. Euro ratcheted higher at NY opening after German preliminary Dec CPI M/M rose by 1.0% (forecast was +0.1%), being the highest monthly increase since Dec 2004 whilst Y/Y index rose by 1.9% (forecast was +1.6%) and was the highest since Oct 2008. Euro later rallied to 1.3240 in NY session on dollar's broad-based weakness.

The British pound initially dipped to 1.5352 but cable managed to rebound from there. Price later rose sharply and rallied to 1.5518 in NY trade on dollar's broad-based weakness.

Economic indicators to be released on Thursday include:

US jobs data, Chicago PMI and pending home sales.

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Market Review - 30/12/2010 21:40 GMT

Dollar rebounds from 7-week low against yen on upbeat US economic data

The dollar recovered from a fresh 7-week low against the Japanese yen on Thursday as U.S. initial jobless claims fell more than expected and Chicago PMI index also rose to the highest in two decades. The series of robust US economic data suggested the US economy was gaining upward momentum, lifting the Treasury bond yields.

The greenback initially fell to 81.28 against the Japanese yen in Asian morning, however, the pair recovered from there on short-covering. Dollar later rebounded to 81.86 in NY session, supported by the release of a series of upbeat US economic data.

U.S. Chicago PMI came in at 68.6 in Dec, much stronger than the forecast of 61.0 and the index was the highest since 1988. US pending home sales rose by 3.5% m/m in Nov versus the forecast of +0.8% m/m on Bloomberg. U.S. weekly jobless claims was 388k vs forecast of 415k and the data was the lowest since July of 2008. Treasury yields rose later as traders interpreted the labour market was improving.

Euro maintained a firm undertone on Thursday as price was supported by the early release of strong Italian business confidence on Reuters. Dec index climbed to 103 vs forecast of 101.6. The index showed business sentiment in Italy's manufacturing sector rose to its highest level in nearly 3 years in December. Euro continued to edge higher to 1.3315 but eased later as dollar rebounded after the release of strong US economic data.

The British pound initially rose to 1.5535 but price tanked from there and eventually tumbled to 1.5367 in NY session before staging a minor recovery. Cross-selling in pound pressured cable as eur/gbp rose from 0.8520 to 0.8634. Traders sold pound aggressively as the Land Registry said house prices dropped by 0.6% m/m in November while a Bloomberg survey showed house prices would fall further in 2011.

The Swiss franc hit record highs against the euro and dollar as traders bought the Swiss currency as safe-haven asset. The Swiss franc rose to 0.9350 against the greenback and 1.2398 against euro.

Friday would be holiday for the German, Japanese and Swiss markets.

Economic indicators to be released on Friday include:

UK Nationwide house prices.

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