Forex Review – Euro falls on weak risk appetite; dollar gains after drop in jobless claims

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EURUSD pulled back from a one month high and was due for a correction after having risen sharply too fast. An opportunity for profit-taking ensued. After hitting strong resistance levels EURUSD fell from and early session high of 1.3825 down to 1.3720. Risk appetite faded a little today especially after an ECB monthly report that warned about the impact on the euro and the region’s banks if bondholders are forced to take losses in euro zone bailouts. This reminded investors that barriers to a solution to the debt crisis still exist as little is known until the upcoming EU and G20 summits about the bank recapitalization plan. Thus caution about pushing the euro higher led to some selling today. Meanwhile a broadly stronger dollar today pressured the euro, especially after a satisfactory US unemployment claims report.

GBPUSD opened the European trading session at 1.5733 and fell to 1.5665 taking direction from EURUSD and the risk-off sentiment that developed today, resulting in riskier assets being sold against the safer and more liquid US dollar. Data showing the UK trade deficit narrowed more than expected last month helped prevent the pound from falling further. Against a broadly weaker euro, sterling gained almost 50 pips as EURGBP was pressured down to 0.8732 from a high of 0.8779.

The Australian dollar was sold off in response to the euro sell-off today as currencies perceived to be higher risk weakened against the safe haven dollar. This pushed AUDUSD down to 1.0130, knocking it off a three-week high of 1.0231 hit earlier in the Asian session after data showed Australian employment rose by a surprisingly strong 20,400 in September, the biggest increase in seven months.

EURJPY tumbled following a broad sell-off in the euro today. EURJPY fell from an early high of 106.56 down to 105.23. Despite its gains versus the euro and other currencies, the dollar fell against the yen down to 76.66 from a high of 77.20 yen as the Japanese currency gained across the board. Yesterday (Wednesday) the dollar had hit a one-month high of 77.47.

USDCAD edged up from a session low of 1.0162 to hit an intra-day high of 1.0232. The Canadian dollar weakened against its US counterpart as risk appetite faded today and crude oil fell to a two-day low. This affected commodity-price-sensitive currencies like the loonie because Canada is a major oil exporter.

Gold fell by as much as $7 a troy ounce after U.S. jobless claims data was lower than expected, which boosted the dollar. Gold and dollar traditionally have an inverse relationship. Spot gold fell within a minute of the data from $1,669.78 to a European session low of $1,662.78.