By: Dukascopy
Previous session overview
The dollar fell slightly against the yen and euro in Tokyo Monday as Asian players sold the U.S. unit to take profits following its rise Friday in New York on a better-than-expected U.S. jobs report.
But the dollar likely won't fall much further for the rest of Asia trade, dealers said. They expect European players, heartened by Friday's positive surprise from the U.S. job market data, to reverse the currency's course and push it up later in their first full session since the report.
The closely watched non-farm payrolls data showed 345,000 jobs lost in May, far fewer than the 525,000 economists expected, and the smallest number since the onset of the global financial crisis last fall.
The euro fell more than 1 percent against the US dollar to a new session low as investors sold the euro on concern that the euro appreciated too fast. The European Central Bank left interest rates steady, and indicated that the euro zone would have negative growth this year, but will recover in 2010. Meanwhile, its labor market would deteriorate further in the coming months.
The British pound traded narrowly against the dollar in London morning session. Sterling then rebounded briefly and sharply to as high as USD1.6245 against the dollar after the release of U.S. unemployment rate. Investors focused on the much smaller-than-expected U.S. job cuts as a slower deterioration of the labor market, this improved number supported bets that dollar-denominated assets will gain while the U.S. economy is recovering. Cable later tumbled to an intra-day low of USD1.5940 against the greenback in New York afternoon session.
The Canadian dollar gains evaporated from near an eight-month high after the economy lost a net 41,800 jobs in May after an increase of 35,900 in April.
The Australian Dollar traded around the USD0.8000 level before dropping to USD0.7900 on the Chinalco news before recovering on a strong rally in Commodities and buoyant stock market.
Market expectation
The euro is tipping slightly higher Monday as investors reassess the greenback's recent surge, following data showing signs of possible improvement in the U.S. job market.
Dealers did not totally rule out the possibility of more dollar falls during the rest of the global day. But they said that as the market awaits further U.S. economic indicators later in the week, any sharp declines are unlikely.
For EURUSD bids seen placed to USD1.3940, stronger around USD1.3925. A break below this latter level can open a deeper move toward USD1.3910/00 ahead of USD1.3850. Offers now seen placed from around USD1.3990, with interest extending to USD1.4005.
USDJPY may rise more as players trim shorts amid heightened USD bullishness after better-than-expected U.S. jobs data Friday, says analysts, with pair well supported above 98; technically, the short-term outlook remains bullish ahead of trend-line resistance around 101.15-20. Says most recent IMM report showing speculators still net short USDJPY suggests. Analysts say that we may see further gains in the near term as players unwind positions. Now at JPY98.50 vs intraday low of JPY98.28.
European stocks are expected to open marginally lower Monday, as investors take time to digest last week's strong gains amid signs the U.S. economy, the world's largest, could be pulling out of its slump.
Players will be watching U.S. data such as the April trade balance Wednesday and May retail and food sales Thursday to confirm the view that the country's severe recession may be moderating, dealers said.