Mike Paterson’s daily Forex brief

Yesterday I warned that the Euro was looking shaky and so it proved as Italian borrowing costs soared after the LCH.Clearnet the UK- based clearing house raise the amount of margin, or collateral, that traders must place to insure trades against losses. Add to this increasing concerns as to the credibility of any plans to resolve the crisis there or in Greece and the on-going threat of contagion and it was all that traders needed to give the Euro a sharp slap lower.

These are fickle times and sentiment can turn rapidly as I have oft said and we saw EURUSD fall through the key support lines I mentioned to base at 1.3540, a fall of over 250 pips on the day. Overnight in Asia we broke down through strong support at 1.3500 as traders targeted stop-loss sell orders in thin markets, driving it down to 1.3484 before Europe opened. But we’ve since seen a rally to 1.3575 on rumours that Berlusconi will step down this week-end and talk that the ECB is once again buying peripheral bonds through its SMP (Securities Market Programme) facility.

The fall in the Euro was evident across the board and we saw EURGBP fall again after a brief rally following the awful UK trade deficit figures. I had warned that there were a couple of key sellers around and so it proved and the pair finally came down through the strong 0.8550 support line (GBPEUR 1.1695 resistance) to base at 0.8515 before being driven lower again in Asia.. This morning though we’ve seen a bounce back to 0.8535 (1.1716) in line with the slightly more bullish Euro tone, and I’m hearing that China had a good size buy interest.

Daily Forex Brief2

Daily Forex Brief

Those UK trade figures for September were truly dire and I was amazed that they didn’t shift Theresa May and the border controls fiasco off the agenda in PM’s Question Time… A missed opportunity by Ed Miliband surely. Either way, the market had its attention focussed elsewhere and the Pound held its ground and indeed gained against most others apart from the US Dollar where we saw it finally crumble to 1.5889 before rebounding a little…

Focus will switch to the UK at midday today though when we hear what the BOE have decided to do with interest rates and any further QE.Traders and analysts are expecting no change which if true should help consolidate the Pound's relative strength at this time, after yesterday’s positive flow due in no small part to the large EURGBP interest.

EURCHF has been in volatile mode again at one point breaking down through strong support at 1.2300 only to find good buying interest at 1.2280 and we’ve since been back to 1.2386 before falling again to 1.2320

Now hearing talk that the new Greek PM Papademos will be sworn in at midday and this is adding to give a little calm back to the markets too but it’s not going to cure the problems and I still think Euro and equity rallies should be sold.

The latest risk-off mood has slapped commodity currencies and equities as usual but both are recovering as I type while Gold has failed to hold above $1800 which will be a worry to those long of the shiny stuff in the short term…

Another lively day ahead folks…………

Today's Data:

Live Economic Calendar Powered by Forexpros – The Leading Financial Portal

Weekly Economic CalendarHERE

Interbank Rates as of 08:20 BST

Current Price

Overnight

High

Low

EUR/USD

1.3540

1.3555

1.3484

GBP/USD

1.5935

1.5939

1.5889

EUR/GBP

0.8500

0.8512

0.8484

GBP/EUR

1.1762

1.1787

1.1746

GBP/CHF

1.4497

1.4569

1.4464

GBP/AUD

1.5774

1.5819

1.5668

EUR/CHF

1.2324

1.2386

1.2305

GBP/HKD

12.3544

12.3575

12.3187

EUR/HKD

10.5036

10.5080

10.4750

GBP/ZAR

12.7871

12.8975

12.5865

USD/JPY

77.62

77.88

77.60

GBP/CZK

3.0034

3.0228

2.9881

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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