Mike Paterson’s Daily Forex Brief
After the consolidation comes the continuation of the trend, as is invariably the way, and we’ve now seen the Euro make further gains with the Yen under pressure once more.
USDJPY has kicked on again and so far been up to 92.30 dragging with it EURJPY to 125.98, making light of barrier option resistance along the way. The Japanese authorities plan to drive their currency lower is certainly having an impact but we'll see just how long it is before other countries start kicking off in protest.
The so called "currency war" is just the inevitable consequence of the world trying to devalue all of their currencies during times of recession in order to make goods and services more competitive abroad, and has been well documented in this blog over the years.
It does, of course though, only work fully if you’re a net exporter, otherwise the price of your imports fly higher too. Which is why it can only have a damage limitation impact in the good ol’ UK. Gawd knows how high our trade deficit would be if the Pound wasn’t languishing right now.
Anyhow, the insatiable appetite for Euros continues right now despite Draghi’s links to the Monte de Paschi banking crisis, and Spanish PM Rajoy accused of illegal income from a slush fund. EURUSD has breached the 1.3600 resistance and as I type looks to be heading through the next one at 1.3650.
EURGBP is having another go at 0.8600 (1.1628) and must surely overcome that particular hurdle shortly. While EURAUD is feeding off a vulnerability in the Aussie $ with many analysts looking for a reversal in the AUD bull trend by the end of this year at the very latest.
In all of this the Pound is still looking over the Channel in awe and GBPUSD is struggling to keep pace. Yesterday saw a volatile day governed by month-end flows with a sharp move down to 1.5775 in the morning then an equally sharp retracement back to 1.5840. There currently seems little desire to head much higher than 1.5875 with sellers lined up between 1.5885-95, where there is strong technical resistance. If it breaks up due to the relenting march of EURUSD then expect a quick bail-out of shorts before finding more sellers at 1.5920-30.
UK Manufacturing PMI at 09.30 may have a part to play in that but the big data today comes at 13.30 GMT with the US Non Farm Payrolls number.
All in all, if you thought that January was lively after the malaise that was 2012, it’s not going to be stopping anytime soon, and this frantic Friday could be a real roller-coaster ride of the white knuckle variety!
No such excitement on the last day of the football transfer window. You know things are quiet when the headline news centres around one David Beckham who will now ply his trade in France for 5 months free of charge with his wages going to charity.
More importantly let’s hope the mighty Shrimpers keep up their return to form tomorrow and let’s also give a big shout-out to the England women cricketers currently starting their battle for the World Cup. Â And talking of cricket here’s a real gem of a song that got another deserved airing at the BBC Folk Awards when legendary folkie Roy Harper rightly received a lifetime achievement award. Check out this version played live when he popped in the TMS studio last year.
Wow, FX insight, sport and music. I really am spoiling you all today. If you appreciate my ramblings get your friends to check out my website www.mspfx.co.uk
Have a great week-end out there.
Interbank Rates at 08:42 BST
Today’s Data: BST
09.30-UK – Manufacturing PMI
10.00-EU – Eurozone CPI
13.30-US – Non Farm Payrolls / Unemployment Rate
14.55-US – Michigan Consumer Sentiment
15.00-US – ISM Manufacturing Index
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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.