SH: FX Morning update - US dollar loses momentum in Asia
LONDON (SHARECAST) - The US dollar fell back from its highs overnight after Federal Reservechairman Bernanke stated that the US economy still faced "formidable headwinds" and that any recovery would be restrained by a weak labour market and tight credit.
These rather dovish comments weighed slightly on the dollar.
Japan also announced further stimulus measures, worth $81bn which had the effect of pulling the yen off its daily highs around 88.75/80.
Sterling continues to remain on the softish side ahead of today's industrial production data, and tomorrow's pre-budget report.
EURUSD - yesterday's break below the four week lows at 1.4810/20 saw the Euro drift to its lowest levels since the 4th November at 1.4755.
The break below the 50 day moving average on Friday, has undermined sentiment and the Euro needs to get back and close above the 1.4870 level to stabilise in the short term, and reduce the risk of a test of 1.4650 over the coming days.
GBPUSD - the pound continues to come under pressure leading up to the pre-budget report on Wednesday. It is currently respecting a support line from the 19th October lows at 1.6240 which comes in around, yesterday's lows at 1.6315/20. While above this level the outlook should remain fairly positive, but a break below could well be the pre-cursor to further losses.
As indicated in yesterday's note, rallies could be quite steep and stretch back to the 1.6640 area. The range is currently 1.6300/1.6700 and we need a break either side.
EURGBP - holding in a choppy range at the moment with support just below 0.9000, at 0.8980 area. The Euro needs to overcome the trend line resistance from the recent highs, coming in at 0.9080/85 to re-test the highs of last week. Further sterling weakness continues to be the story, ahead of this morning's UK numbers and tomorrow's PBR, but for now the choppy range of 0.8980/0.9180 remains the story.
USDJPY - is drifting lower as momentum from Friday's move starts to unwind. As indicated in yesterday's afternoon note the dollar has drifted back towards support and in fact overshot to the 88.75/80 area. As long as this level holds then the risk remains for a test back to the highs at 90.75. However any break back below the 88.50/60 break-out area from Friday could well signal a re-test of the 87.50 area.
