One Stop Centre of Financial Market Trading blog

Previous session overview

The dollar reversed overnight losses Monday against the yen and the euro, supported by optimistic U.S. manufacturing data.

That more encouraging economic snapshot gave pause to the more aggressive bets on expected Federal Reserve stimulus.

The manufacturing side of the U.S. economy continued growing in October with an Institute for Supply Management purchasing managers' index rising to 56.9 from 54.4 in September.

Economists had expected the PMI number to slip to 54.3.

Shortly after the PMI data, the euro hit its intra-day low, falling back below USD1.39, and had reversed all gains garnered overnight from strong Chinese manufacturing data that led to a return to riskier assets.

The dollar further retreated from a new 15-year low reached overnight against the yen following the data. The dollar fell to fresh lows against the yen early Monday before investors backed off, reluctant to risk the possibility of another strong Japanese intervention.

The pair fell to JPY80.21, it's lowest in 15 years and the closest it has come to the JPY79.75 level that has stood since April 1995.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.328 from 77.047.

Market expectation

The markets remain focused, in large part, on central banks and their moves this week, said analysts. Most anticipated of all is a decision by the Federal Reserve's Federal Open Market Committee on possible new U.S. economic stimulus after a two-day meeting ending Wednesday.

Investors have been betting on the possibility of the resumption of quantitative easing for the last several months. Since the PMI on Monday was the last important U.S. indicator before Wednesday, it seems likely the currency markets will now take a breather for the next day and a half, said analysts.

The EUER slightly bearish according to 1 and 4 hours indicators, pair has found support around USD1.3890/1.3910 price zone today; lose of this last could signal some downside continuation rally towards USD1.3840, yet downside seems limited for now; hovering around USD1.3935 strong level, pair needs a clear break higher to change this bearish tone, aiming to retest USD1.3980/1.4010 price zone.

Nov 01	Count.	Event	For	Unit	Imp.	Act.	Cons.	Prev.
00:00	NZ	Treasury Monthly Economic Indicators published.
00:00	AU	Market Holiday- All Saint's Day
00:00	LU	Market Holiday- All Saints' Day
00:01	GB	Hometrack housing survey	Oct	% y/y		-0.1		1
00:30	AU	House Price Index	Q3	% q/q		0.1		2.0
02:00	NZ	ANZ Commodity Price	Oct	% m/m		3.5		2.8
07:30	DK	Retail Sales	Sep	% m/m
10:00	DK	PMI	Oct	Index		55.2		50.6
12:30	US	Personal income	Sep	% m/m		-0.1	0.2	0.4
12:30	US	Personal spending	Sep	index		0.2	0.4	0.5
15:00	US	Construction Spending	30-Dec	% m/m		0.5	-0.5	-0.2
15:00	US	Help Wanted Index	Oct	index
15:00	US	ISM Manufacturing	Oct	index		56.9	54	54.4
15:00	JP	BoJ release minutes of prior (4th-5th October) Monetary Policy Meeting