Previous session overview

A combination of worries about prospects for the Federal Reserve to begin tightening U.S. monetary policy and the ability of Greece to service its debt sent the dollar rallying to multi-month highs on Thursday.

The EURUSD tumbled 1.1% to USD1.4371, touching a fresh three-month low, compared with USD1.4527 in late North American trading Wednesday. Losses accelerated after the European unit fell below USD1.4500, the level at which some investors had placed orders intended to limit their losses.

The dollar index (DXY), which tracks the greenback against a trade-weighted basket of six major counterparts, rose to 77.657, up from 76.934 late Wednesday. It reached the highest since early September.

The dollar also bought JPY89.99, compared with JPY89.86 late Wednesday.

Late Wednesday, Standard & Poor's downgraded Greece to a BBB+ rating, matching a downgrade from Fitch Ratings just over a week ago, on concerns the country will struggle to rein in a deficit that stands at more than 12% of gross domestic product.

The greenback also keyed on the Fed's detailing its plans to remove excess liquidity from the financial system, saying its various programs would wind down as previously stated.

Thursday, the British pound fell to two-month lows after a disappointing report on retail sales, which knocked away the upbeat sentiment caused by Wednesday's report of a drop in U.K. jobless claims.

Market expectation

The dollar has jumped about 3.8% so far this month, causing many traders who had shorted the U.S. currency thinking its fall would continue to reverse their tactics.

Pound edges on to begin challenge of the reported offers placed between USD1.6140/50. A break here to open a move on toward USD1.6180 with stronger resistance noted between USD1.6200/10.

EURUSD has stretched to USD1.4370 area amid muted flows and as shorts from earlier in the day fall victim to a light squeeze, traders mention light talk as well of semi-official name buys under USD1.4340 as helping to underpin off lows. Despite the bounce, sell rallies sentiment remains alive and well, reported offers at USD1.4370/80 now being eroded but further supply expected at USD1.4400.

Disclaimer: the data made available by Dukascopy (Suisse) SAis for informational purposes only. Publication of this data by Dukascopy (Suisse) SA does not constitute provision of investment advice and Dukascopy (Suisse) SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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