Mike Paterson’s daily Forex brief

After the panic buying of Euros following the Spanish bank bailout we’ve seen a continuation of yesterday’s reality check that I spoke of as traders scrambled to get short again. Crazy days indeed, but not unexpected.

It was made quite clear by the “Troika” (IMF, ECB, EC) that they will be imposing some conditions on the bailout and monitoring it closely contrary to a statement made by Spanish PM Rajoy. Further complicating the issue, German Finance Minister Schaeuble stressed that this supervision will be limited to the banking sector. But European Commission spokesman Altafaj, who is Spanish, said the loan's disbursement will also be subject to the country hitting previously agreed macroeconomic targets.

Either way, traders were keen to get short again having been squeezed out on Sunday night and we’ve seen EURUSD all the way down to test recent lows around 1.2445. Strong support is expected between 1.2400-1.2435 and but plenty of sellers above 1.2525. EURJPY was also heavily sold but rallied when the IMF overnight said that they thought the Yen may be overvalued only for the pair to fall back again as EURUSD continued its decline.

EURGBP has seen a big sell-off all the way back down to recent lows around 0.8050 (GBPEUR up to 1.2422) as GBPUSD found some decent buying interest around 1.5500 before finally giving way.

Overall the Pound has fared ok as attention has been firmly on the Euro but we can expect it to come under examination again soon, starting with data due out at 09.30 BST.

Stock markets predictably also came off as the euphoria faded but, like the Euro, we’ve seen some consolidation off the lows this morning.

Today should see some good two-way business but there’s a bit of blood on the books despite the moves of the last 48 hours being fairly predictable. T’was ever thus.

Forex Update-The Economic Voice Limited

Forex Update-The Economic Voice Limited

England started their Euro 2012 campaign with a 1-1 draw against France having taken the lead and thereafter showing little to inspire, but solid enough overall. The group was made more interesting though with Ukraine’s 2-1 victory over Sweden to lead the table.

The 3rd Test v West Indies was understandably washed out, a bit like England’s performance, and we’ll now have to sharpen up before the serious business of taking on the South Africans later in the summer.

Meanwhile the rain continues to pour and the Euro’s finding a bit of support as I sign-off. Which one lasts the longest is this week’s hot debate!

Interbank Rates 08:43 BST

Currency Pair

Current

Overnight

High Low
EUR/USD 1.2498 1.2522 1.2450
GBP/USD 1.5506 1.5524 1.5462
EUR/GBP 0.8060 0.8081 0.8052
GBP/EUR 1.2406 1.2421 1.2373
GBP/CHF 1.4902 1.4919 1.4863
GBP/AUD 1.5666 1.5714 1.5620
EUR/CHF 1.2010 1.2013 1.2007
GBP/HKD 12.0221 12.0354 11.9874
EUR/HKD 9.6906 9.7271 9.6509
GBP/ZAR 13.0623 13.1409 12.9796
USDJPY 79.55 79.70 79.16
GBPCZK 31.8340 31.8923 30.5810

Today’s Data: BST

09.30- UK- Industrial Production / Manufacturing Production

13.30- US- Import Price Index

15.00- UK- NIESR GDP Estimate

19.00- US- Federal Budget Balance

00.01- UK- Nationwide Consumer Confidence

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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