Mike Paterson’s daily Forex brief

Well, we got the Troika report on Greece which effectively said there’s a problem but don’t worry they’re going to plan to make a plan to make a plan blah blah blah. And then Slovakia voted against boosting the EFSF bail-out fund but that was as per printed programme and more a vote of no confidence in the government and is expected to be passed when they vote again in a couple of days. Then last night saw the US Senate pass the China currency bill aimed at curbing China’s advantage and the bill moves on to Congress where it is unlikely to have such an easy ride.

Either way, China have been extremely active overnight as the Yuan was sold heavily after the bill went through and the PBOC (Peoples Bank of China) have been seen intervening to stem the fall both in the currency and the stock market. The fact that they felt the need to act so aggressively should be a warning shot across the bows of complacency. I’ve said for a long while that China has deep set problems of its own which will come home in droves once demand from the rest of the world dries up even more than it has currently done.

The FX markets turned into risk-off mode while all this was going on having consolidated yesterday through all the Euro news. EURUSD had looked perky all day but failed again to breach strong resistance at 1.3700 and was already falling back in late NY before dipping again to 1.3582 in Asia. However, sovereign buyers have been in doing their usual dip-buying and we’ve since climbed back up to 1.3658 as I type exacerbated by warm words of comfort from Merkel et al.

With the Pound still out of favour after the QE2 measures GBPUSD has struggled to hold above 1.5600 as EURGBP continues to be well supported above 0.8725 and now through resistance at 0.8750 (GBPEUR down through 1.1428). The next strong line is 0.8800 (1.1364) and may well signal a more sustained move higher.UK Unemployment data out at 09.30 BST should have something to say about that and the topside looks under threat particularly if 1.3700 finally gives way on EURUSD and right now there’s another attempt going on at 1.3685, with GBPUSD above 1.5600 again but lagging behind still.

The Aussie $ got sold off in Asia on the Chinese factor but has since recovered and looks perky once again, while EURCHF is starting to find a higher base level around 1.2320 and is looking to break through the strong technical resistance around 1.2435. The market remains aware/respectful of SNB intentions and seems to be providing a natural support helped by better Euro sentiment all around, rightly or wrongly.

Tonight sees the release of the last FOMC Minutes which should make interesting reading and we can expect another scrappy day for sure.

STOP PRESS! EURUSD breaking through 1.3700.EURGBP up to 0.8771.

Today's Data:


Live Economic Calendar Powered by Forexpros – The Leading Financial Portal

Weekly Economic CalendarHERE

Interbank Rates as of 08.38 BST

Current Price

Overnight

High

Low

EUR/USD

1.3648

1.3670

1.3583

GBP/USD

1.5588

1.5607

1.5542

EUR/GBP

0.8759

0.8767

0.8735

GBP/EUR

1.1420

1.4449

1.1405

GBP/CHF

1.4158

1.4193

1.4138

GBP/AUD

1.5649

1.5772

1.5609

EUR/CHF

1.2392

1.2420

1.2370

GBP/HKD

12.0854

12.1000

12.0490

GBP/ZAR

12.3130

12.4330

12.2484

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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