Mike Paterson’s daily Forex brief
More of the same in the past 24 hours as attention remains firmly fixed on Eurozone sovereign debt with Spanish bond yields hitting a dangerous/unsustainable 6% level and concerns over the weak Chinese trade data.
With the worrying economic figures out of Spain and announcement of new austerity measures its little surprise that attention has concentrated on its ability to claw its way out of the mess. Bond yields surged through 6% which is generally recognized as the trigger point at which the cost of covering sovereign debt becomes unsustainable.
The Euro got sold off again with EURUSD falling to 1.3054 and EURJPY coming under attack particularly before running into a couple of good name buyers and we’ve seen a rally of sorts, albeit unconvincing again.
EURGBP rose to 0.8277 yesterday as GBPUSD fell through 1.5830 support and touched 1.5808 but the latter has rallied overnight helped by profit-taking and better than expected BRC retail sales data, running into sellers around 1.5930 again. EURGBP has capped and fallen back toward the 0.8230 support.
The other main action centred on the previously reported much weaker Chinese trade data with the dramatic fall in imports from the expected 9% to 5.3% as the main focus. Chinese imports of raw materials are the first step in the global manufacturing cycle and a slowdown is one of the best, early signs of weakening global growth.
True, I’m sure they have plenty of resources stockpiled over the past few months which could account for the fall in demand this time but it remains a huge concern none the less. Copper prices took a tumble and with that the floodgates opened for commodity-dependent currencies such as the Aussie $ and Rand to get slapped.
AUDUSD fell to strong support lines at 1.0230 forcing GBPAUD up through 1.5500 before settling back on short-term profit taking, while GBPZAR has surged higher to 12.77 and still remains up there.
Little in the way of data today, but plenty of Eurozone bond auctions to provide the feeding frenzy that traders crave, even if many are still on beaches or up ‘n down slopes! As we know, lack of liquidity brings increased volatility.
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