Mike Paterson’s daily Forex brief
Well, the week has certainly got off to a lively start as first yesterday the USD continued to retreat, then BHP put out a warning on reduced iron ore exports to China which slapped the Aussie $ and now this morning rumours of a military coup in Beijing has sent the USD higher once more and the Aussie $ tumbling even further.
Keep up out there, FX markets are notoriously feast, famine and fickle!
Yesterday EURUSD climbed up through 1.3200 as US bond yields tumbled and we’ve seen highs of 1.3245. GBPUSD broke up through previous recent resistance around at 1.5865 to reach target levels of 1.5895 and even touched 1.5920 on stop-loss buying before falling back.
EURUSD fell to 0.8284 (GBPEUR up to 1.2071) on this GBPUSD surge but similarly bounced back as the 1.5920 level proved a step too far at this time. We’ve since been up to 0.8345 (1.1983).
The Euro was also getting support from a weakening Yen driving EURJPY up to 4 1/2 month highs of 110.82.
Following the release of the RBA’s Minutes on the last Aussie interest rate meeting which were justifiably cautious, the world’s largest miner, BHP Billiton said they saw demand from China “flattening out”. This had an immediate negative impact on the Aussie $ as traders rushed to scramble out of recently acquired long-positions.
And then a short while ago the Chinese internet community was awash with talk of a military coup supporting the claims with photos of a large military presence in various parts of Beijing. The key figures in the action are said to be: Hu Jintao, the head of the CCP; Wen Jiabao, the Premier; Zhou Yongkang, who has control of the People’s Republic of China’s police forces; and Bo Xilai, who was dismissed from his post as head of the Chongqing City Communist Party on March 15 by Wen Jiabao, after a scandal involving Bo’s former police chief.
The reports remain unconfirmed but it’s been enough to send the Aussie $ even lower to 1.0488 versus the USD with GBPAUD climbing sharply to 1.5124. Traders have also made a sharp about-turn to buy some US $ back and EURUSD has fallen to 1.3185 and GBPUSD down to 1.5845.
Closer to home UK inflation data just out shows a rate of 3.4% year on year, the lowest since November 2010. The ONS says biggest downward pressure on CPI was from housing and household services, recreation and transport. Biggest upward drivers were alcohol and tobacco. There’s been little impact on the Pound thus far.
Looks like another interesting day ahead though!
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Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email firstname.lastname@example.org
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.