Mike Paterson's daily Forex brief.

As US politicians fail to even vote on a debt-ceiling Bill (postponed until today) , fears have increased that the toys are coming out the pram on both sides completely oblivious to the repercussions a failure on this task will have not only on the US economy but on markets globally. Politics rather than sound economic understanding is not a good place to be right now but hey, when did the Americans last listen to anyone else……….?


In another day of illiquid trading conditions we've seen EURUSD fall through support at 1.4330, hit the next key line around 1.4250 but bounce back up only to fall again as traders favour risk-off positioning. To this extent the Aussie and Rand have also been slapped by real money accounts taking profits on heavily bought books previously this week, and this has given both GBPAUD and GBPZAR a lift from the lows of yesterday.

With the EUR again being targeted on renewed debt contagion fears (shock) EURGBP fell further to 0.8740 (GBPEUR up to 1.1444) but traders remain mindful of the month-end buying I keep banging on about and we've seen some pullback up to the 0.8780 (1.1390) pivot level before falling back slightly this morning thus far.

GBPUSD has also fallen in line with the Euro and we've seen lows of 1.6260 so far with GBPCHF also falling as EURCHF once again comes under attack (I said yesterday it was a dangerous game to short the Swiss Franc even if it did make sense!). Key support on EURCHF now comes in at 1.1370 and there are name buyers in USD CHF just below current levels which seem to be holding it up for the moment. Definitely one to keep an eye on and the SNB definitely will, having just released a report showing losses of over CHF 10 billion on their Forex reserves given the surge in CHF value… And these figures don't take into account the cost of previous intervention which is reported to be in excess of CHF 30 billion………… Who said central banks always get their way in the end?!

With equity and commodity markets steadying it really now is a game of wait and see what happens across the pond. As I said yesterday, failure to resolve the problem will have dire consequences and is too scary to contemplate but with politicians in a state of nose-cutting-to spite-face mode any last-minute positive outcome is far from certain…….

I'm away from my desk today, but sadly not at Trent Bridge to enjoy the cricket! Come on England!

Have a good week-end all, and re-charge your batteries. Next week is going to be a hum-dinger and we haven't even finished this one yet…………

Today's Data:

09.30-UK- M4 Money Supply / Net Lending to Individuals. / Mortgage Approvals

10.00-EU- Eurozone CPI

13.30-US- Q2 GDP (Provisional) / Employment Cost Index

14.45-US- Chicago PMI

15.00-US- Michigan Consumer Sentiment Index

Interbank Rates as of 08.37 GMT

Current Price

Overnight

High

Low

EUR/USD

1.4271

1.4363

1.4256

GBP/USD

1.6288

1.6379

1.6284

EUR/GBP

0.8764

0.8780

0.8740

GBP/EUR

1.1410

1.1444

1.1388

GBP/CHF

1.3062

1.3132

1.3047

GBP/AUD

1.4885

1.4937

1.4858

EUR/CHF

1.1446

1.1493

1.1419

GBP/HKD

12.6280

12.6990

12.6250

GBP/ZAR

11.0315

11.0761

10.9840

Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.

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 mike.paterson@economicvoice.com
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.

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