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Dukascopy Market Review, US Session, 7th October

Previous session overview
The dollar has leapt higher against the yen, with knock-on effects across other currencies, as traders report unusually heavy dollar-buying ahead of the start of New York trading.

Official intervention is not seen as the source of the move but traders say that "someone with deep pockets" is expressing unease with the dollar's recent slide.

The dollar bounced from JPY88.01 to the JPY88.95 area within around half an hour in an unusually abrupt move, knocking the euro back under USD1.47 from the USD1.4725 area and creating dollar-positive ripples across the currency markets.

Traders reported unusually heavy dollar-buying ahead of the start of New York trading, helping bring the greenback off its session low at JPY88.01 to the JPY88.95 area within around half an hour in an unusually abrupt move. It ultimately rose to a session high at JPY89.26. That in turn helped knock the euro back under USD1.47 from the USD1.4725.

The pound, which had been suffering from weak industrial production figures Tuesday, stabilized a little when Nationwide reported that consumer confidence in the U.K. rose last month to levels last seen in April 2008.

Market expectation
EURUSD initial stops set off sub USD1.4680, with more seen at USD1.4670 and USD1.4660. Traders not look for a larger sell-off however, without a new catalyst. US stocks look set to open in mild negative territory.

EURJPY made a brief show under the 200-day moving average in the European morning as dollar-yen tumbled to eight-month lows, the cross slipping to JPY129.58 before a sharp bounce in all yen pairs. Rate now trying to regain the JPY131 handle with offers seen at JPY131.30 in small, stronger around JPY131.50.

USDJPY another short-squeeze sees the remaining intra-day players cleaned out as dollar-yen makes a show back above JPY89.00, so far stalling at the Asian high. Some speculate that this could have been Mid-East demand again after the sharp bounce seen into the US open from that region.

Traders said that investor nerves ahead of the European Central Bank monetary policy decision Thursday are also playing a role, as ECB president Jean-Claude Trichet could potentially use his press conference to bemoan the dollar's current weakness.

Dukascopy