Mike Paterson’s daily Forex brief

Well, we got the crazy day I anticipated, not that there's many days that go by unnoticed at the moment in these unprecedented times.

The Euro was doing nicely enough and again riding the storm thank you very much for the reasons I've discussed, but then came an announcement that the US Federal Reserve would provide billions of USD liquidity to the ECB in a joint move with the BOE and BOJ and SNB. This facility will last through the end of this year so that European banks can access dollar liquidity that they have been denied access to by the market. The Fed, ECB, BOE, SNB and BOJ will all participate in an arrangement similar to that put in place in 2008 after the Lehman crash.

What the market now is waiting to see is whether this is a one-off plaster to cover a couple of deep wounds ( perhaps pre-empting and cushioning a Greek default ) of if US Treasury Sec Tim Geithner will today bring something more substantial to the Eurozone finance ministers meeting in Poland. Something more substantial such as the TARP (Troubled Asset Relief Program) initiative introduced in 2008 as a counter measure to the sub-prime mortgage crisis.

This uncertainty/scepticism was reflected in the Euro which shot up to 1.13937) on the news (massive resistance line at 1.3935) but quickly came back when reality set in causing traders to run for cover both sides of the move. And since then we've seen them cautious to take on any real exposure but model funds and investment houses have once again been selling the rallies and we're back down to 1.3788.

The sharp move higher was also reflected in EURGBP which made further gains to 0.8791 (GBPEUR down to 1.1378) just shy of the next big resistance line at 0.8810 before retracing to 0.8742 (1.1439) but GBPUSD showed little appetite to stay above 1.5800 on the EURUSD rally and has since fallen back to 1.5760. The Pound overall continues to look soggy (stop me if you've heard this one before here) with GBPCHF and GBPAUD both lower even with the selling going on in those two other currencies.

So all eyes today will be on Poland as the gathered throng endeavour to resolve the current Eurozone debt crisis, and the bickering, and the fact that contagion could spread outside the EU to the US and globally. Cue Mr Geithner's attendance and Mr Obama's urging of the 17-nation Eurozone to settle their differences. Their own economy is in a poor enough state without the added fall-out from Europe.

I remain one of the sceptics as to what today can and will achieve in real terms, as also it would appear from their report published this morning, are Deutsche Bank who see a fall in the Euro and EURUSD down to 1.3000 sooner rather than later.

I'm not so sure about that bit because of the vested interest in Asia but it's certainly feasible as we're not a long way away from that level and still capped under 1.4000. What is certain is that what we're seeing at the moment has dire consequences for all, on not even a worst case scenario basis.

Let's see what unfolds.

Have a good week-end folks.

Today's Data:

Weekly Economic CalendarHERE

Interbank Rates as of 08.24 BST

Current Price

Overnight

High

Low

EUR/USD

1.3796

1.3894

1.3784

GBP/USD

1.5767

1.5818

1.5759

EUR/GBP

0.8745

0.8791

0.8742

GBP/EUR

1.1422

1.1439

1.1374

GBP/CHF

1.3778

1.3805

1.3725

GBP/AUD

1.5359

1.5479

1.5315

EUR/CHF

1.2061

1.2082

1.2054

GBP/HKD

12.2250

12.2640

12.2180

GBP/ZAR

11.6870

11.7587

11.6078

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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