Mike Paterson’s daily Forex brief

What a difference a night makes!

In my Euro summit update on Friday the consensus remained positive for the Euro, although I remained sceptical as to the rationale behind its strength, and the BOJ were nowhere to been seen as USDJPY fell to record lows around 75.50.

But I’ve said before you can never underestimate a central bank so cue huge intervention in Asia, albeit solo by the BOJ, driving USDJPY 400 pips higher to 79.56. They’ve met with plenty of sellers along the way and at one point seemed determined to hold it above 79.20 but to no avail, and as Europe opened up we saw more sellers emerge and we’re now back down to 78.10. Never underestimate central banks, but they’re still not bigger than the market but it’s not helped the intervention cause in the last hour to have BOJ Governor Shirikawa talking of possible merits of Yen strength which is downright absurd given what they’ve been doing all night. But the BOJ are back in now and they have almost massive reserves to throw at this. Game on!

This USD buying, along with some negative Euro press over the week-end, triggered similar interest elsewhere and we’ve seen EURUSD fall back from 1.4171 highs to 1.3975 and GBPUSD down at 1.5964 from 1.6144. Never a dull moment eh, and we’re almost back to where we were before the EU announcement in the early hours of Thursday morning. Seems like an age ago huh? Good size bids now on EURUSD between 1.3950-70.

The Pound has improved a tad against the Euro to 0.8744 and we now have to see whether we can hold below the 0.8750 (1.1430) pivot line that I talked about on Friday. Elsewhere we’ve seen improvement against the commodity currencies which is a regular theme when we have risk-off scenarios.

EURCHF still clings to 1.2200 while Gold and stocks are both off as profit-taking kicks in after the strong rally.

Seems like the Eurozone are still courting China to lend support to the EFSF despite talk on Friday of a €100 billion pledge but it can only be a matter of time before official details are released. Whilst Euro leaders are keen to have us believe this is merely an investment opportunity we should be under no illusion that it’s a massive shift in the global corridors of power and undermines the package itself. China, as I’ve written here many times before, is already propping up the Euro in trillions in bond buying and USD diversification. Not to continue to throw good money after bad doesn’t seem like an option they are going to adopt any time soon but the ramifications are huge.

As I type I’m hearing China is back in buying EURUSD around 1.3990 and we’re back to 1.4025.

We’ve got an action-packed week coming up with plenty of data today and key interest rate decisions from the US (Wednesday) and the Eurozone (Thursday) so lots to look forward as well as the BOE interest rate decision next week. Doubts over the effectiveness/practicality of the EZ debt deals will undoubtedly remain throughout.

Hold onto your hats still ‘cos this ride is going to get even bumpier.

And talking of bumpy rides I’ve just time to mention another glorious 3 point haul on Saturday for the Shrimpers putting them rightly back at the top of League 2!

Have a good week all.

Today's Data:


Live Economic Calendar Powered by Forexpros – The Leading Financial Portal

Weekly Economic CalendarHERE

Interbank Rates as of 07:58 BST

Current Price

Overnight

High

Low

EUR/USD

1.4028

1.4171

1.3975

GBP/USD

1.6037

1.6144

1.5964

EUR/GBP

0.8744

0.8785

0.8744

GBP/EUR

1.1433

1.1437

1.1375

GBP/CHF

1.3957

1.3975

1.3886

GBP/AUD

1.5181

1.5207

1.5039

EUR/CHF

1.2202

1.2231

1.2183

GBP/HKD

12.4334

12.5164

12.3768

GBP/ZAR

12.5210

12.7741

12.4004

USD/JPY

78.46

79.54

75.56

GBP/CZK

2.8245

2.8292

2.8080

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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