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Dukascopy Market Review, US Session, 15th October

Previous session overview
The dollar is stronger against most major rivals in morning trading Thursday as go-go markets that pushed the Dow Jones Industrial Average past 10,000 and beat the greenback overnight to fresh 14-month lows now seem to be taking a breather.

Better-than-expected U.S. consumer price index data, along with an improvement in weekly jobless claims numbers, both released Thursday morning, failed to revive risk appetite that has sapped out of the currency market in early New York trading. Disappointment that Goldman Sachs' results weren't as strong as some had expected added to the reversal and supported the dollar.

The U.K. pound also is recovering strongly, as investors who had bet against sterling are now being squeezed as sterling hits key trading triggers put in place by short-term investors. The pound has suffered in recent sessions amid expectations that the Bank of England will be one of the laggard central banks in tightening monetary policy.

The Dollar Index, based on a trade-weighted basket of six currencies, is at 75.722, up from an overnight low at 75.211, a fresh 14 month low, and from 75.551 late Wednesday.

The European Central Bank is satisfied with the impact its unconventional policy measures have, even in the face of "subdued" lending developments, ECB President Jean-Claude Trichet said Thursday.

Trichet said part of what was happening was due to weaker demand for credit, while unconventional policy measures, which would include easy access to central bank funds for banks, helped to shore up lending.

Market expectation
Euro rally is pausing for breath, having almost reached resistance levels at USD1.4968/72, which was level that capped topside in November 2007 and latter the measured move of bull-flag break on Oct 6. Some pullback not ruled out, and initial support seen at USD1.4832/45 and 10-day support line at USD1.4778.

EURJPY technical traders are noting the pullback in the cross found a base in line with the Ichimoku Cloud top after the break above in the European morning. Subsequent 100-point bounce is bringing the 61.8% retrace of the August-October sell-off into play at JPY135.04. Key area to watch seen placed as the October highs just shy of JPY135.50.

USDJPY stalls ahead of tech resistance around JPY90.80 (61.8% Fib of JPY92.53/JPY88.02 move) - Japanese exporter interest noted around that level, traders say.

Canadian currency watchers believe that while a short-lived period of correction could ensue for the Canadian currency following two weeks of steady gains, its ultimate target remains the parity mark with the U.S. dollar, last achieved in July 2008.

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