Mike Paterson’s daily Forex brief

The craziness continues as markets remain doubtful over any short-term solutions to the Eurozone debt crisis (how many times have we commentators typed that phrase over the past 12 months?) yet eager to cling on to any ray of hope that is offered up by the plethora of comments and rumour that currently abound.

Yesterday’s positive news on Italian debt sent EURUSD soaring through strong resistance at 1.3420 and Aussie/USD up to 1.0086 before falling back as hopes faded once again and we’ve now seen EURUSD test the equally strong support around 1.3250 where there is rumoured to be a large barrier option buy interest, probably out of Asia, and AUDUSD has fallen back to 0.9970.

Risk-on, risk-off. Blink and you miss it. How can the EFSF be leveraged beyond current levels? Will the IMF step in? If so how, and will the ECB be able to play a more significant role? And should they? And who’s going to pay for it all? Germany alone will not be able to save the day. Add to this rising tensions once again the Middle East and we have a very unpalatable cocktail to consume as we approach the supposedly festive season.

In all this mayhem the Pound seems to have found some support from the MSCI semi-annual review that I mentioned on Monday, seemingly shrugging off, for the moment at least, any risk associated with the storming of the British Embassy in Tehran and George Osborne’s predictably gloomy autumn statement. GBPUSD understandably fell in the wake of the EURUSD sell-off but refused to fall back below 1.55500 but EURGBP has fallen to the strong support line around 0.8530 (GBPEUR resistance 1.1723) that I mentioned yesterday (see? I really don’t make these up!) where is it is currently holding and in fact rallied back above 0.8550 (1.1690). Elsewhere the Pound is still in consolidation mode. Then there's the public sector strike today, a little matter of one of biggest UK days of action since the 1929 General Strike that looks like it's being shrugged off.

Daily Forex Brief2

Daily Forex Brief

I accept that many of you will be nonplussed by my animated stance over such relatively small movements but in this $3.6 trillion a day FX market there are forces at work that mean something will have to give eventually, and probably sooner rather than later. The amount of short Euro positions are at record highs, and understandably so given the fundamentals, yet we still haven’t seen a major collapse per se and that is as much to do with the vested interest of the large Asian players as it is any conviction that somehow we will pull through this.

Loads of data out today and it’s month-end, just to add to the volatility. Hold onto your hats once again.

Today's Data:

08.55-EU- German Unemployment

10.00-EU- Eurozone CPI / Eurozone Unemployment

10.30-CH- KOF Leading Indicators

13.15-US- ADP Non Farm Employment Change

13.30-US- Non-Farm Productivity / Unit Labour Costs

14.45-US- Chicago PMI

15.00-US- Pending Home Sales

19.00-US- Federal Reserve Beige Book

Interbank Rates as of 08:17 BST

Current Price

Overnight

High

Low

EUR/USD

1.3266

1.3359

1.3260

GBP/USD

1.5536

1.5630

1.5529

EUR/GBP

0.8540

0.8554

0.8530

GBP/EUR

1.1710

1.1725

1.1689

GBP/CHF

1.4359

1.4382

1.4338

GBP/AUD

1.5597

1.5641

1.5485

EUR/CHF

1.2261

1.2280

1.2254

GBP/HKD

12.0450

12.1179

12.0396

EUR/HKD

10.2860

10.3669

10.2683

GBP/ZAR

13.0862

13.1733

12.9651

USD/JPY

77.96

78.12

77.86

GBP/CZK

3.0001

3.0104

2.9878

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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