The dollar lost steam

by Ava FX Analysis Team

Currencies

EUR/USD: Helped by surge in Ozzie

The dollar lost steam on Thursday as U.S. bond yields dipped after a sizzling rise in the past few days, while the Australian dollar surged on data showing the country's employment is growing far faster than expected. The euro rose 0.3 percent against the dollar to $1.3305 extending its rebound from a one-week low around $1.3180 on set on Wednesday. The euro gained momentum after hitting stop-loss orders at around $1.3280. But its inability to hold gains above $1.3400 this week meant a probe lower was still possible, with a sustained break of $1.3180 opening the way to a test of $1.3060/50. The European Commission welcomed Ireland's tough 2011 austerity budget, which received its first approval from parliament, opening the way for international loans to start flowing to Dublin. The euro was also helped by a surge in the Australian dollar, which jumped nearly one percent at one point following the release of surprisingly strong employment data in the country.

GBPUSD: BoE expected to leave interest rates unchanged

The 1.5838 level capped again overnight with cable opening at 1.5805 in Asia. Cable headed lower in early Asia with the USD bid once again on stronger US treasury yields, touching a low of 1.5789 before stronger than expected Australian jobs data saw the AUD/USD sharply higher. This saw the focus shift from a USD driven move to a risk driven market with cable managing a high so far of 1.5834, again failing at the 1.5838 hurdle. While 1.5838 caps the risk of a move back to 1.5500 remains, but a break higher opens up for tests of the 1.6080/00 region. GBP/JPY was the worst performing of the JPY crosses today as cable failed to benefit as much as EUR/USD and AUD/USD from the Aus jobs data inspired positive focus on risk. GBP/JPY opened at 132.77 and traded 132.45/85 so far, last at 132.55. EUR/GBP rallied as EUR/USD raced higher with the AUD/USD, opening at 0.8390 and trading 0.8380/16. Today in the U.K. we have Halifax HPI at 0800GMT, Trade Balance at 0830GMT, CB Leading Index at 1000GMT and then the BOE MPC announcement at 1200GMT with no change expected. Technically, 1.5838 remains key.

USD/JPY: Strong Dollar resistance seen at 84.40

Against the yen, the dollar fell 0.3 percent to 83.78 yen pressured by selling from Japanese exporters. Traders said the dollar faced strong resistance around 84.40-60, an area it has repeatedly failed to break since late last month. USD/JPY fell off on a combination of US name and Japanese exporter sales. The pair had already backed off a bit from the 84.31 high seen overnight as US yields came off highs earlier yesterday. From 3.33%, the yield on the US 10-year Treasury note fell to 3.265% at the close, still higher however than the 3.141% close the day before and the 2.94% seen Monday. From an early high of 84.12, USD/JPY traded back below 84.00 to 83.65 as longs bailed as well. JPY crosses were mixed with EUR/JPY and AUD/JPY performing the best. From 111.27, EUR/JPY rose to 111.58, eclipsing the 111.48 high seen overnight despite simmering EZ debt concerns. AUD/JPY rallied from 82.15 to 82.73, eclipsing its overnight high of 82.61 on the back of a good jobs report. NZD/JPY, in contrast, was better offered, moving down from 63.07 to 62.34 on the rather gloomy RBNZ economic view and downward adjustments to interest rate projections. GBP/JPY too was better offered, falling off from 132.87 to 132.45 on long liquidation. GBP/JPY did remain not far from the 132.99 high seen overnight and more or less in consolidation mode.

AUD/NZD: Ozzie experiences significant gains overnight

The Australian dollar surged a full cent after jobs data blew away forecasts, suggesting markets were under pricing the risk of a rate hike in the months ahead, while the New Zealand dollar was weighed by a dovish central bank statement. The Australian dollar jumped 0.9 percent to $0.9881, from an early low of $0.9777, to challenge Fibonacci resistance at $0.9862, the 50 percent retracement of the November 5-December 1 fall. Australian employment surged 54,600, far surpassing expectations of 19,000, while jobless rate dropped to 5.2 percent from 5.4 percent. This points to a fast growing economy and supports the Reserve Bank of Australia's rationale for raising interest rates to 4.75 percent last month. The New Zealand dollar initially slid half a US cent to as low as $0.7430, before clawing back some ground to $0.7500. That was still sharply down from a high of $0.7666 early in the week but above major support around $0.7400. Both currencies supported by commodities which managed to edge ahead despite this week's jump in US bond yields. Investors still wary that China was likely to raise interest rates over the weekend, though the move has been so well discounted that the market might be relieved to get it over.