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Overall, the currency market continued to sell the dollar in the overnight session, even though the pace was not so strong. For a short period, the link between the S&P futures and the major pairs seems to have been lost, but came back to life during the European session. Ahead, the U.S. calendar is empty which might have a negative influence on the market’s volume. It is expected that, as the market is heading towards the close of the U.S. session, the market’s momentum will gradually fade. 

The Euro (Eur/Usd) gained as much as 80 pips during the overnight session, reaching TheLFB R1 (1.3975), but was dragged lower by the pound during the London open. For now, the euro trades near the highest value since January, as institutional traders are looking to diversify from their dollar holdings.

The Pound (Gbp/Usd) moved within the same range as in the late U.S. session during the Asian session. However, the pound plunged a little more than 100 pips in the European session, leading the majors lower against the dollar. Yesterday, the pound managed to close in the green, even though it plunged nearly 270 pips during the European session, after the S&P’s downgrade.

The revised GDP showed that the economy contracted by 1.9%, as the preliminary release showed. From the first quarter of 2008, the U.K. economy has contracted a whopping 4.1%. 

The Aussie (Aud/Usd) saw a 40-pip range during the first part of the Friday’s session, but overall, the pair was unable to develop a decent move. Additionally, during the Asian session the pair broke briefly above the 0.7800 area, the resistance of the last few days. 

The Cad (Usd/Cad) managed to break under the 1.1350 support area during the Asian session, on very weak momentum, but the pair only traded side-ways since then. On the daily chart, the next major support area for the pair is in the 1.1300 area. 

The Swissy (Usd/Chf) is heading lower for the fifth consecutive day, something that made the pair reach a new low for the current year. This comes, even though lately the SNB had intensified its verbal threats concerning intervention in the currency market. 

The Yen (Usd/Yen) declined 60 pips during the early part of the Asian session, but the pair retraced some parts of the move relatively quickly. Since then, the yen traded side-ways, in a relatively small range, even though the markets expected the BoJ decision. On the daily chart, the yen is trading at the lowest value reached in the last two months of trading.

The Bank of Japan decided by a unanimous vote to maintain the Overnight Call Rate at 0.10%. Estimates are that the Japanese economy will contract 3% in 2009, however BoJ noted in the current statement that the economy is beginning to stabilize. The Bank of Japan also announced tonight that it will accept foreign bonds issued by U.S., U.K., Germany and France as collateral. 

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