Morning Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Jul 27 09 07:13 GMT |

Previous session overview The dollar rose against the yen Monday in Asia on the back of a recovery in risk appetite, but dealers said further gains are likely to be limited due to selling orders related to forex options contracts. The dollar climbed as high as JPY94.93, as rising Japanese stocks prompted players to buy risk-sensitive currencies such as the dollar and the euro, dealers said. Japan's benchmark Nikkei 225 Stock Average rose above 10,000 for the first time since July 1. Still, the greenback won't be able to rise far above JPY95.00 in this global day because some players want to sell a massive amount of dollars around this level, dealers said. The EUR strengthened against the dollar on Friday as data showed the euro zone economy is stabilizing and German business sentiment is also rising; the data suggested that economic activity in the region is improving. The German Ifo business climate index increased to 87.3 in July fm 85.9 (compared to the consensus forecast of a reading of 86.5) while German PMI manufacturing and services indices rose by more than expected. These 2 stronger-than-expected data boosted euro to intra-day high of USD1.4255 against the dollar in Europe; however, price later retreated in New York session as a drop in the U.S. The British pound fell against the dollar after a report that showed the UK economy shrank more than expected. Domestic gross domestic product fell 0.8% in the second quarter, compared to forecasts of a 0.3% fall. The economy shrank 5.6% from the previous year. Also hurting the sterling is an index of services which fell 1.0% in May. The Australian dollar pushed higher in thin trading Monday, while bond futures fell as risk appetite again ticked higher ahead of a keynote speech by Reserve Bank of Australia Governor Glenn Stevens on Tuesday. Market expectation The euro and dollar are little-changed against each other and the yen Monday, while sterling is slightly lower against its major rivals from some light technical pressure. Meanwhile, traders are likely to watch resurging stock markets for hints about this week's risk tolerance. European stocks are seen opening higher Monday as optimism remains infectious within the asset class with traders predicting there are still more gains to come in global equities following several days of rallies. EURUSD currently trades around USD1.4245 with the underlying tone remaining positive. Above USD1.4260 to expose stops, which if triggered to open a move toward USD1.4290/00. Above USD1.4300 and the early June 2009 highs at USD1.4339 may move back into view. Support seen at USD1.4220, a break below to allow for a move toward USD1.4200/1.4190 with stops placed on a break below. Further demand placed toward the overnight low at USD1.4170. Sellers include Japanese exporters and currency options players, who sold dollar-call/yen-put options contracts, with a JPY95.00 strike that will expire later in the global day analysts said. The sellers will lose money if the dollar is traded above the strike price when contracts expire. Later this week, market attention will turn to moves in U.S. Treasury yields as the market prepares to absorb a record amount of bond supply, dealers said. Analysts expect the RBA Governor will map out the near-term direction on monetary policy, in turn setting fresh direction for the local currency and interest rates market. Dukascopy Swiss FX Group Legal disclaimer and risk disclosure This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.