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Dukascopy Market Review, European Session, 4th November

Previous session overview
The dollar edged down against the yen in Asia Wednesday as short-term players sold the U.S. unit ahead of a Federal Open Mark Committee meeting later in the global day.

At 0450 GMT, the dollar traded at JPY90.22 compared with JPY90.37 late Tuesday in New York. It could fall to JPY89.80 if the FOMC does not lay the groundwork for eventual dollar-positive rate hikes, said dealers.
The risk-sensitive euro and Australian dollar were also lower against the safe-haven Japanese unit after data showed Australian retail sales fell 0.2% in September, worse than expectations for a 0.4% rise, dealers said.

The Dollar Index, which measures the currency's value against six major units including the euro, edged down to 76.253 from 76.320.

Earlier, euro traded relatively quietly in Asia with Tokyo markets closed for a holiday, the pair then tumbled in Europe to as low as USD1.4626 partly due to the selloff in European stock markets.

The Pound broke below USD1.6300 as the market continued to focus on the downside ahead of BOE and in the midst of banking concerns. A rebound in commodities and US stocks helped lift the pair from lows.

The Australian dollar was slightly stronger late Wednesday despite a volatile session fueled by surprising weakness in retail sales in September.

Market expectation
EURJPY, EURUSD keep rising as players buy higher-yielding assets with risk appetite slightly higher on stronger Asian share markets, World Bank forecast for Chinese GDP to grow 8.7% in 2010, above its revised estimate for 8.4% growth in 2009, say analysts.

Yet regardless of the results, volatilities are unlikely to decline much further for now, the dealers said, as players are still worried about a sudden sharp fall in the dollar due to lingering risk-aversion sentiment. They added players will avoid unloading a lot of hedges even after the FOMC meeting today, as other events, such as non-farm payrolls data due later this week, will come up.

EURUSD traders have suggested that sell interest seen placed to USD1.4760, a break to open a move toward USD1.4775/80 ahead of USD1.4811 (Tuesday's Asian highs). Support USD1.4705/00, stronger toward USD1.4680. Markets expected to remain relatively subdued ahead of this evening's FOMC announcement.
Traders said the next hurdle for the Australian dollar will be the outcome of the U.S. Federal Reserve two-day policy meeting Thursday.

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