Morning Forex Overview

Previous session overview

ECB chief Jean-Claude Trichet addressed the European Parliament Monday, saying the euro-zone economy has weakened since January and that there is 'a high degree of uncertainty' surrounding the economic outlook. But, he said, there are no significant risks for deflation and that the central bank will do what is needed to cope with the financial crisis.

Trichet added that the central bank will achieve its medium-term objective, to keep inflation below but near 2%.

On Monday, EURUSD extended the decline that started at the end of last week, though at a slower pace. The pair slipped south throughout the morning session in Europe and during the early hours of US trading. Later in the session, pressure on EURUSD eased slightly (despite a credit rating downgrades of Ireland and Hungary) and the pair closed the session at USD1.3199.

Pound was dragged lower by the Euro although held up rather well with EURGPB slipping below 0.93. UK data showed signs of stabilization with Mortgage Approvals jumping to 38k vs. 32k previously.

The yen weakened against the dollar and euro in Asia Tuesday as Japanese importers sold the Japanese currency for book-closing on the last day of the Japanese fiscal year.

The Australian dollar enjoyed a fillip in Asia Tuesday, helped by marginally firmer sentiment and views the Reserve Bank of Australia may hold rates steady at next week's policy meeting

Market expectation

The euro and dollar are higher against the yen on Tuesday following the report of Japan's plans to buy stocks.

Risk appetite otherwise waned ahead of Thursday's Group of 20 summit and European Central Bank meeting, with traders waiting to see the results.

USDJPY pushing back up to retest the Asian highs at JPY98.44 as European dealers pick up on Asian rumors of dollar-yen demand for the month and quarter-end fix. Offers into JPY98.50 now under pressure, more noted into last week's double-day highs at JPY98.85/90.

EURUSD recovery off late Asia pullback lows around USD1.3215 met renewed supply around USD1.3260 (76.4% USD1.3274/1.3214), with rate currently trading around USD1.3245. Support now seen placed at USD1.3240, more at USD1.3225 through to USD1.3215. Resistance at USD1.3260, stronger between USD1.3275/80.

Analysts expect both the local currency and interest rate futures to ebb and flow ahead of the April 7 RBA policy meeting, with markets priced for an easing of around 25 basis points.

Ahead of the meeting, a key focus will be on Wednesday's retail sales for February, analysts said, with economists expecting retail trade to have fallen by 0.3% compared with January.

Dukascopy Swiss FX Group

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