Mike Paterson’s Daily Forex Brief
Once again, as I always warn, it was the ECB Press Conference that stirred things up with ECB President Draghi revealing that certain members were in favour of a rate cut yesterday and that they discussed whether they might introduce negative interest rates on deposits.
This was enough in these thin, uncertain, markets to send the Euro tumbling making a mockery of its recent gains. Up until this point markets were going nowhere fast with both the BOE and ECB leaving rates on hold as expected, but after the press conference comments it became clear that there was going to be a rush for the exit doors for Euro bulls.
EURUSD fell through support lines at 1.3020 and 1.3000 and that was enough to trigger some serious stop-loss selling to 1.2960 and we’ve since been down to 1.2917 after the Bundesbank this morning released some reduced growth forecasts.
There are still some decent names buying Euros in the dips but the FX market’s herding instinct has proved stronger and this latest move, although possibly overdone, shows the Euro’s vulnerability again.
EURGBP wiped its feet at the strong support lines at 0.8100 that I mentioned but then caved into the Euro selling elsewhere and it too fell rapidly on stop-loss selling. The pair has since been down this morning to test the next strong support between 0.8050-60 (GBPEUR up to 1.2418) where it remains as I type.
The rapid turnaround in Euro sentiment has been seen across the board as EURCHF, EURAUD and EURJPY all had traders being forced out of recently acquired positions. In tight ranges traders will always get complacent and this only adds to the mayhem when someone/something sends them scuttling for cover.
GBPUSD has fallen back through 1.6070 support lines to a low this morning of 1.6022. Overall the Pound remains a mixed bag but mostly lower and we’ve seen a little more selling now on the release of weaker than expected production data.
It’s a coin-flip from here for the Euro, and indeed the Pound and Dollar, but there’s a fair bit of debris out there right now and we have the key US Non-Farm Payroll data this afternoon which will undoubtedly add something to the mix especially on a fickle Friday. Time to get those orders into the market once again; however wish-list they are.
Top of my wish-list is another three points for the mighty Shrimpers tomorrow as they try to extend their unbeaten run in all competitions to ten matches. Heady days indeed and I hope you’re all getting on board this particular sporting roller-coaster!
And England’s cricketers continue their dominance of the 3rd Test despite losing Cook to a bizarre run-out and KP just now to a plumb LBW decision but have a lead of 133 with five wickets down.. How this pitch plays over days 4 and 5 remains to be seen but surely it can only be England’s to lose from here………..?
Have a great week-end all.
Interbank Rates at 08:46 BST
Today’s Data: BST
09.30-UK – Industrial Production / Manufacturing Production
10.00-EU – ECB’s Draghi speaks
11.00-EU – German Industrial Production
13.30-US – Non Farm Payrolls / Unemployment Rate
14.55-US – Michigan Consumer Sentiment
15.00-UK – NIESR GDP Estimate
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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 firstname.lastname@example.org
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.