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Dukascopy Market Review, US Session, 5th November

Previous session overview
The dollar is now flat against the euro and yen Thursday morning, as currencies stick to narrow ranges after better-than-expected U.S. economic data.

The data had initially given a mild boost to risk sentiment that benefited the dollar's rivals, but that effect had worn off by mid-morning.

Otherwise, currencies have registered only limited response to Thursday's largely as-expected policy decisions by the Bank of England and the European Central Bank. Both held their benchmark interest rates steady, though the U.K. monetary authority also announced an expansion of its asset purchase program to lend further support to the U.K. economy.

The Dollar Index, a trade-weighted basket of six currencies, was at 75.703, from 75.717.
Since weakening in the wake of the Federal Reserve's retention on Wednesday of its outlook for a prolonged period of low U.S. interest rates, the dollar and other major currencies have been confined to fairly narrow movements.

Initial jobless claims last week fell more than forecast to 512,000 from 532,000 a week earlier, while U.S. productivity advanced well beyond expectations at a 9.5% rate in July-September.

The U.S. currency also fell slightly against the yen after the U.S. government said claims for unemployment benefits fell in the latest week, while productivity rose more than expected in the third quarter.

The British pound gained ground following the Bank of England's decision to expand its quantitative easing program by 25 billion pounds. Some in the market had expected an even bigger expansion of the program that buys up gilts and other assets.

Market expectation
USDJPY still subject to the ebb and flow of risk appetites with little in the way of yen-centric interest to drive this pair, traders say. Dollar orbits JPY90.50, just about the middle of the day's range, with demand eyed back at the overnight low area near JPY90.00 and offers atop JPY90.90.

EURUSD ebbing lower again for trade around USD1.4865 and the move coming against a backdrop of firm US stocks, suggesting risk appetites are waning a bit ahead of the key event risk of NFP set for Friday. Flows modest, traders say, participation said to be quite light, but intra-day stops at risk sub USD1.4850.

Traders say, the USD is sideways waiting for Friday's NFP data and most expect a technical consolidation today. It would likely take follow-on weakness in equities to break the USD higher as most traders are waiting for Friday more so than today's data. Look for the USD to remain two-way today with a firm undertone; likely a short-squeeze will develop as the late shorts who expected an FOMC-led decline are disappointed by the close.

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