fundamental alert

Forex Market Update: EUR/USD Trade Under 1.2900 as Dollar Buying Interest Increase (Update)

Friday, 28 November 2008 08:24:07 GMT  |  Geng Chen, DailyFX Research

EUR/USD maintained ranges now trade under 1.2900 in quiet European trade. An early move up towards 1.2960 ran out of steam as European interbank names bought back the dollar amid speculation of good month end buying interest. In holiday thin trade option expiries could dominate, with good exposure at 1.2900, 1.2960 and 1.3000 today. Dollar buying interest has kept pressure on the downside, but there is still ongoing interest to hedge against further euro gains. 1-wk 1.32s traded as hedge fund and proprietary names look to cover the NFP data, while 2-wk 1.31s also went through in modest in early European trade. The narrowing up in the spot range has weighed on the curve in to the weekend, with 1-wk at 20.20/23.80% and the 1-mth is easier at 20.15/21.85%, reflecting the interest to hedge theta. Meanwhile, USD/JPY, NZD/USD and USD/CAD still kept in their tight range.

 

The dollar was range-bound in Asian trading with impetus zapped by the U.S. holiday on Thursday and the approach of month end. EUR/USD price action has vacillated either side of 1.2900 today in Asia with no firm direction. Euro-Zone outlook remains weak after the sharp rise in French unemployment reported earlier today. The markets expect a 50 bp rate cut next week by the ECB in the wake of recent ECB official comments. Experts are warning that the French real estate crisis could last until 2011 with the sale of homes down 44% for the year in Q3. Bad news in the auto section continues, Daimler expect to cut the work at four German sites. EUR/USD remains in an even broader range of 1.2550-1.3100 and trading is expected to remain subdued into the weekend. Meanwhile, USD/JPY trading in a 40 point range between 95.20-95.60, sellers are front-running the offers at 95.70-80 with more selling eyed at 96.00. Bids remain at 95.00 on dips. Kiwi has held a tight range with buyers at 0.5500 and sellers emerging at 0.5540. Asian stock markets were mixed though most notable was the 9.5% gain on Australia's S&P/ASX index for the week which was a record weekly gain. Crude dropped under $54 again as demand continues to slide while gold was up about $3 with gold bulls still talking of a big rally to come.

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