Forex News | Currency News by Forexlive

Happy Halloween to all!

Another week is winding down, a week in which forex volatility remained very high but volatility in other financial markets dropped.

Stepping back a step, the dollar remains quite firm but off its best levels. Given that the reduced bleeding in related markets like developed-market equities, emerging markets equities and currencies and a thawing in the credit markets, the worst of the financial crisis looks to be over. The unknown is if the resulting economic hangover is fully priced-in or if markets still have another leg to the downside as they come to grips with a very slow-growth global environment . My personal opinion is a deep recession is very much discounted at present so we are more vulnerable to upside rather than downside economic surprises.

Next week there are a few events of note: A US presidential election, interest rate meetings in the eurozone and UK, a US employment report… Just another relaxing walk in the park.

Having given several speeches on the economy and just cut rates to match their modern-era low at 1%, Fed chair Bernanke stuck to mortgage finance in his speech at UC Berkeley.

Major currencies are meandering as the market keeps an eye on the clock. Equities are firm headed into the final hour of the week, a supportive factor for EUR/JPY and the individual legs of that cross. EUR/USD trades at 1.2740 and USD/JPY at 98.50.

It remains a total crapshoot out there with prices swinging around based purely on supply and demand. There is very little speculative interest to offset legitimate flows that trickle into the market from time to time.  With volatility still high, every time the market begins to become directional options market makers who are short volatility are forced to sell falling markets and buy rising markets. Once markets snap-back, they have to do the opposite. That creates lost of churning and burning and little rhyme or reason.

USD/JPY is back t 98.50,m supported by a 100 gain in the Dow and a rebound in emerging market shares. Brazil is back to flat after being down heavily all day, for example.

USD/JPY has come under renewed pressure as USD/JPY dips below the 98.00 handle after testing and holding resistance at 99.12. EUR/JPY selling at the month-end fix contributed to the heavy tone. Focus will next turn to the equity markets were asset allocation out of bonds and into stocks is expected into month-end.

USD/CAD has been insanely volatile for days with liquidity hampered by the end of the Canadian banks fiscal year today. The buck dipped briefly below 1.2100 in the run up to and in the wake of the fixing but dealers note Chinese bids just below the 1.2100 level. maybe they will provide a line in the sand for the greenback.

EUR/USD swung in a about a 60 pip range around the time of the fixing. Pretty remarkable but given the week-long build up, it almost seems like an anti-climax.

EUR/JPY was harder hit than EUR/USD, falling back to 124.82 from 125.64 right before the fix.

USD/JPY has pulled back to 98.85 after stalling at 99.12. Looks like traders are quick to book profits, fearful the fix could prove more hype than help.

Tick, tick, tick…

USD/JPY has firmed as far 99.12 in the run up to 16:00 GMT fixing, the same high posted in Tokyo yesterday. 99.70 is the Tuesday high if 99.12 is taken out. In addition to broad month-end dollar demand USD/JPY is getting a boost from a 1% rally in US equities. A break through the 100.15/20 area would set up a retest of 103.00 but many fear the dollar demand could slip once the fixing is out of the way.

USD/JPY heads into the final hour before the month-end fixing with a head of steam, trading now at 98.77. Offers are expected from Japanese exporters near the 99.00 level but it could get jumpy on the topside if these offers don’t materialize. From a Fibo perspective, 100.18 is the 76.4% retracement of the drop from 103 to 90.90. Dealers wonder if the dollar will plummet once the month-end demand evaporates after the fixing.

• 1
• 2
• 3
• 4
• 5
• ...
• 92
• >