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Dukascopy Market Review, US Session, 4th November

Previous session overview
The euro strengthened against the dollar in early Wednesday trading on higher stock markets in Asia and Europe.

But major currencies stayed within well-worn ranges, as investors looked toward an afternoon meeting of the Federal Reserve's interest rate-setting committee.

The Dollar Index, a trade-weighted basket of six currencies, was at 76.043, from 76.320.

ADP U.S. employment data released Wednesday showed a drop in October private-sector jobs of 203,000, which is what economists had expected. The number improved from September's loss of 254,000 private-sector jobs, but failed to substantially move major currencies immediately after its release.

Stocks and risky currencies were boosted by a World Bank forecast overnight that China would grow by 8.7% in 2010 after expanding by 8.4% in 2009. A better-than-expected reading on the euro zone and U.K. services sector added to the gains.

October's euro zone purchasing managers' index for the service industries rose to 52.6 in October from 50.9 in September.

The dollar is weighed down by the Fed's ultra-low interest rates, as investors seek better returns in higher-yielding assets amid rebounding global markets.

The euro changed hands at USD1.4832, up from USD1.4712. The dollar pushed higher against the Japanese currency, however, to trade at JPY90.84from JPY90.34 Tuesday. The yen is usually the biggest loser when investors want to move towards riskier holdings.

Market expectation
EURUSD talk reminding of USD1.4825 expiry, said to be attracting euro higher. Pair trades to USD1.4805 with sights set on USD1.4810 stops. Backdrop of US stock gains aiding risk.

Pound traders add that stops have been building above USD1.6550, noting that Asian sovereign sell interest (which capped rate during the European morning session at USD1.6545) remains in place in the USD1.6545/50 area.

EURGBP moves above stg0.8950, as recovery from earlier lows at stg0.89195 extends, the move influenced by euro-dollar as cable struggles to rise. Offers in the cross seen at stg0.8960/65 ahead of stronger interest toward stg0.8980. Above here and rate can edge back toward stg0.8995/00. Support remains in place back around stg0.8920.

USDJPY dollar slippage elsewhere sees dollar-yen ease slightly to JPY90.75 area, the pair continuing to backtrack from earlier high at JPY91.03 notched as a few nearby stops were victimized over JPY90.85/00 zone, the 'magnetic' stops mentioned earlier. Talk earlier mentioned supply at JPY91.30 level but talk now inserting additional supply ahead of there at JPY91.10/20. Bids at a distant JPY90.20, the yen marginally weak as risk-appetite rebuilds.

U.S. stocks also are expected to open higher, which could extend the gains of the risk-positive euro and other higher-yielding currencies, but gains could be muted as investors refrain from taking big positions ahead of the Fed meeting.

Investors will be looking for any clues from the Federal Open Market Committee on whether key U.S. interest rates will rise from their current ultra-low levels.

Dukascopy Currency Trading