I said yesterday that the Euro was looking heavy and so it proved with the currency coming under further pressure as the EU summit proposals for fiscal union came under the microscope.

EURUSD has fallen to new recent lows of 1.3160, just above very strong, arguably critical, support around 1.3145. There was a mighty battle on the way down to defend both 1.3250 and 1.3200 but both gave way as pressure mounted across the board. This morning we’ve seen some profit taking from large players who were selling yesterday but whether this will be enough to stem the downward momentum remains to be seen.

EURGBP fell in line with this bearish Euro sentiment and aided by strong buying of GBPUSD from the Middle East that I mentioned. There was also talk of a large EURGBP sell order going through from a UK pharmaceutical company, supposedly to cover dividend payments. The net result was the pair falling from 0.8530 (GBPEUR basing at 1.1723) and breaking down through recent lows around 0.8495 (1.1771) to hit 9 month lows of 0.8441 (1.1848) overnight in Asia before finding support as 1.3145 came into view on EURUSD.

EURCHF has dealt itself into a hole around 1.2350 ahead of the SNB meeting on Thursday but the generally USD positive tone has helped USDCHF up to 0.9389 as traders remain cautious of being caught short of EURCHF with higher pegs still being touted in some quarters.

The Pound seems to be shrugging off the negative side of Eurozone isolation for the moment but the jury remains firmly out on whether PM Cameron played the wrong and/or a naive hand during the early hours of Friday morning for the sake of his own party reputation. Certainly his Deputy, Lib Dem Nick Clegg, thought so judging by his conspicuous absence from Parliament yesterday as Cameron attempted to explain his actions. This morning’s Cabinet meeting will be an interesting one to witness.

Forex Brief Tues

FX Update

Nevertheless the Pound has held its ground, and indeed made a little headway, against the more obvious targets (see rate table) ahead of this morning’s key inflation data (CPI and RPI) at 09.30, while at 10.00 GMT we have the German and Eurozone ZEW economic sentiment survey which can hardly be expected to be bullish.

Attention will then focus across the Pond for US Retail Sales at 13.30 GMT and the latest interest rate decision and FOMC statement at 19.15 GMT.

Equities and metals still look soft and the Euro is coming under pressure again as I sign off with EURUSD trading at 1.3170 after that brief rally back above 1.3200 a little earlier.

Little doubt that we have another volatile day ahead.

Today's Data:

09.30-UK- CPI/RPI – DCLG House Price Index
10.00-EU- German ZEW Economic Sentiment / Eurozone ZEW Economic Sentiment
13.30-US- Retail Sales
15.00-US- Business Inventories
19.15-US- Interest Rate Decision / FOMC Statement

Interbank Rates as of 08:40 BST

Current Price

Overnight

High

Low

EUR/USD

1.3207

1.3215

1.3161

GBP/USD

1.5618

1.5630

1.5572

EUR/GBP

0.8460

0.8465

0.8441

GBP/EUR

1.1819

1.1848

1.1811

GBP/CHF

1.4610

1.4647

1.4584

GBP/AUD

1.5432

1.5533

1.5423

EUR/CHF

1.2358

1.2378

1.2350

GBP/HKD

12.1086

12.1179

12.0730

EUR/HKD

10.2450

10.2607

10.1900

GBP/ZAR

12.8550

12.9527

12.8536

USD/JPY

77.72

77.97

77.70

GBP/CZK

3.0297

3.0476

3.0283

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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