Mike Paterson’s daily Forex brief
We’ve seen further gains by the Euro as decent auction results, Greece debt re-scheduling back on track, upbeat comments by ECB President Draghi on LTRO and decent US data have all helped to squeeze traders out of more of their short-Euro positions.
None of the news would have mattered earlier in the week after last week’s rapid fall but, as I’ve said oft before, the market doesn’t work so much on fundamentals but sentiment and more importantly the balance of shorts versus longs. If traders get over-exposed one way or the other then we will always get exacerbated/forced moves as near-term/day traders run for cover.
Overall nothing much has changed this week but it hasn’t got worse so sentiment has changed, and on an oversold market we’ve seen a decent recovery for the Euro and equities. EURUSD eventually broke up through strong resistance at 1.2925 in NY having traded erratically between 1.2880 and 1.2920 for a while, and in Asia we went higher again to 1.2986 before moving back down as the 1.3000 barrier proved too much to take on. There’s talk of massive option expiries at that level today so we could still gravitate toward there again, but there’s sellers around again at 1.2940 as I type.
EURGBP has broken up through 0.8355 resistance and so far capped at 0.8379 ( GBPEUR basing at 1.1933 ) but the prime movers have been the EURJPY and EURAUD that I mentioned yesterday and which have both continued to march higher as traders get squeezed out these more illiquid pairs. Sellers in these pairs too are re-appearing this morning.
Have we seen the whole reversal now or is there more to come, if not today then soon? The jury is definitely out on that one, but with market positions getting more evenly balanced then there is now possibly less momentum to keep driving it higher. Those who are short Euros for the longer term will not be fazed by this move and will only start to get a little concerned should EURUSD break back up through 1.31-1.32.
UK Retail Sales just out came in at +0.6% month on month and + 2.6% year on year which is as expected and we’ve seen little GBP reaction at this point. US existing home sales is the only other data of note out today but it’s Friday and we all know by now that means a nutty day regardless.
Seems like I spoke too soon about England’s cricketers staging some sort of comeback versus Pakistan and a 10 wicket humiliation is not a good way to start any series but, hey, following England cricket is not unlike following the mighty Shrimpers. Never a dull moment!
Have a great week-end everyone.
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