Daily Currency Analysis

EUR/USD

The dollar was generally weaker in Asian trading on Monday as markets continued to analyse last week’s payroll data which raised fresh doubts over the US economy.

The dollar was also undermined by the weekend G7 meetings where there was no additional support for the US currency. European policy makers continued to voice their support for a strong dollar in comments on Monday with ECB President Trichet stating that there was no need for the dollar to weaken against the Euro. Markets will want a more decisive stance in favour of a US currency, especially from the US administration, before making any decisive shift in sentiment towards the US currency.

The Euro-zone Sentix improved to -12.6 for October from -14.6 the previous month which pushed the index to a two-year high, although it was again slightly weaker than expected. There will be further fears that any recovery in GDP growth will falter quickly given the underlying weakness in consumer spending. There was also some fresh over the situation in Latvia which is liable to unsettle the Euro to some extent. There will also be caution ahead of the ECB policy meeting on Thursday even though an unchanged policy looks likely.

The US ISM index for the non-manufacturing sector rose to 50.9 from 48.4 the previous month and this was the strongest reading for over 12 months, although there was still evidence of underlying vulnerability. Although risk appetite staged a cautious recovery following the US data, there was still an underlying mood of uncertainty with notable volatility in the commodity markets.

The dollar edged weaker following the data as underlying sentiment remained negative with the Euro pushing back to test dollar support above 1.4650.

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are nearly 80% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Yen

Domestic comments on the yen will remain a key focus in the near term. Over the weekend, Finance Minister Fujii warned that Japan could intervene if currency moves were excessive. The remarks will reinforce speculation that the government will not tolerate rapid yen gains from current levels given fears over the economy’s health. Following the comments, the dollar was able to consolidate above 89.50 against the yen in Asia on Monday despite underlying vulnerability.

The US currency was again unable to make a serious attempt at pushing above the 90 level as it remained generally on the defensive and the yen was probing dollar support levels close to 89.50 later in the US session with narrow yen ranges.

Sterling

Sterling pushed above the 1.60 level against the US dollar in early Europe on Monday, but again hit tough resistance above this level. The services-sector PMI index was stronger than expected with a move to a two-year high of 55.3 for September from 54.1 which will should underpin confidence towards the economy to some extent.

Nevertheless, overall sentiment towards the currency remains fragile and there will be unease that the currency failed to take advantage of a rally in equity markets.

There will also be caution ahead of Thursday’s Bank of England policy meeting. Markets will be expecting the central bank to hold policy steady, but there will still be a reluctance to hold long Sterling positions ahead of the meeting.

As Sterling confidence wilted it remained trapped below 1.60 against the dollar and also dipped to re-test support close to 0.92 against the Euro later in the US session.

Swiss franc

The dollar failed to make any impression on the franc during Monday and there was a renewed decline to near 1.03 later in the US session. The Euro was unable to make any headway against the franc for much of the day, but did edge higher to 1.5125 in New York

The Swiss currency is still proving resilient in global markets even when risk appetite is firm and there appears a continuing reluctance to sell the franc. The recent industrial survey evidence will continue to provide some support and ease fears over the competitive position.

The National Bank policy actions will remain an important focus, especially if the Euro re-tests support below the 1.51 region.

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are nearly 80% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Australian dollar

There were further Australian dollar gains on Monday as the US unit remained on the defensive with a high near 0.8750. Commodity prices also looked to rally after recent losses. Overall Australian dollar confidence is liable to remain firm in the near term with a close focus on the Reserve Bank interest rate decision due on Tuesday.

Although a rate increase looks unlikely, the Australian currency will tend to remain firm if there are hints over interest rate increases by the central bank. There are still important vulnerabilities surrounding the global economy which will pose a potential threat to the Australian currency. A weaker US trend was a key factor in New York and the Australian dollar rallied to highs above 0.8780.