Friday, July 1, 2011

Forex Morning Overview

Previous session overview
The yen fell against the dollar and euro on Friday in Asia after the Bank of Japan's June tankan survey showed a deeper-than-expected drop in business sentiment in the aftermath of the March 11 disaster. 

Dealers said the dollar could rise further if U.S. manufacturing data later in the global day help to soothe worries about the state of the U.S. economy. 

The tankan survey's headline diffusion index plummeted to minus 9 from plus 6 in the March survey, worse than expectations for minus 7 and falling into negative territory for the first time in five quarters. 

U.S. economic data on Thursday also provided a risk-positive factor, with the headline figure in a closely watched survey of Chicago-area purchasing managers at 61.1 in June, higher than 56.6 in May and beating forecasts for 53.0.

The greenback was at JPY80.71 from JPY80.56 in New York Thursday while the euro was at JPY117.14 from JPY116.81. Against the dollar, the single unit was USD1.4515 from USD1.4502. 

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 74.347 from 74.389. 

The Pound is flat this morning against the dollar, while falling against the rest of its major peers as prospects quickly fade for tighter policy in the UK. The pound fell to a 16-month low against the EUR after a successful Greek austerity vote paved the way for higher interest rates in the Eurozone.

The Australian dollar edged slightly lower on weak Chinese manufacturing numbers Friday but still looked primed to close out the week significantly higher. At 0600 GMT, the Australian dollar was at USD1.0712, down slightly from USD1.0735 late Thursday. Against the Japanese yen, the Australian dollar was at JPY86.48, up slightly from JPY86.32.
Market expectation
The EURUSD may rise further if it breaches the USD1.4550-USD1.4700 range according to Elliott wave principle, a type of technical analysis, say dealers. Rising above the range would be a confirmation that the pair is above the fifth wave. The house tips the pair's three-month forecast at USD1.5000. The EURUSD is now at USD1.4531, up from USD1.4502 late Thursday in New York as concerns over Greece's debt situation ease, dealers say. Investors now think that the EU and IMF may decide to extend another round of aid to Athens at next week's meeting.

Market participants will keep paying attention to U.S. economic indicators to gauge whether the current slowdown in U.S. economic momentum is long-lasting or temporary.
At 1400 GMT, the Institute for Supply Management will release its U.S. manufacturing index for June, and if the result matches the market's forecast of 51.8, optimism will spread further and the dollar as a result may rise above JPY81.0, dealers said. 

European stocks are expected to start broadly flat Friday, with some consolidation of recent gains expected, while the focus is expected to shift from Greece somewhat to the health of global economies.