Forex News

USD/JPY implied volatilities in Asia fall as USD/JPY supported by Fed Bernanke comments, waning risk of a sudden decline in pair. Still, "fundamental weakness in the dollar remains, so players will want to see some U.S. economic indicators to back up the dollar's strength", Tokyo trader says; this suggests volatilities may not fall significantly further ahead of release of U.S. payrolls data tomorrow. 1-month ATM options implied vols at 11.20%/11.50% vs 11.50%/12.0% in NY. 1-month 25 delta risk-reversals favor USD puts/JPY calls 2.30%/2.60% vs 2.20%/2.90% in NY.

EUR/USD falls below 1.54 on EBS, pulling down EUR/JPY with it; "as the euro/dollar has entered a downward trend, some players are unwinding their long positions," says Tokyo trader; adds, on back of Fed Bernanke's USD-supportive comments, pair likely to fall further. But says "judging from recent European economic indicators, the euro-zone economy is still not doing that bad", so pair likely to be supported at 1.53 for now. Also says players unlikely to make one-sided bets ahead of ECB interest rate decision later in day. EUR/USD last at 1.5394 on EBS, EUR/JPY last at 162.28 on EBS

ECB Trichet comments after rate decision today eyed for cues on EUR/USD direction, says Tokyo trader. Says, "in technical terms, the euro/dollar seems to be in a downtrend and Bernanke's comments in the past two days have reinforced this," and "now players are interesting in seeing if the ECB's inflation stance has changed in any way." Says key support level now is 1.5285 low marked in May; "should this level be broken, this may initiate a further accelerated downtrend, as many players will likely unwind their long positions," he says. Until comments, pair likely to stay in tight band with support around 1.54; EUR/USD last at 1.5437 on EBS

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