Mike Paterson’s daily Forex brief

So the Eurozone luminaries have met, and continue to do so, and what have we learnt so far? Well, they’ve kind of agreed on a re-capitalization plan for the banks (now they’ve just got to decide how to fund it) and various comments suggest that “good progress” is being made on the EFSF bailout amount. And all they have to decide here is whether its €250 billion, € 1 trillion, or €2 trillion, or… Oh and how they’re going to pay for that too. Which is where the French and Germans are having trouble agreeing. Shock…and how much of a haircut Greece will get on its debt. And whether Italy is the next to fall, and.

All in all nothing more or less than we expected ahead of the now much trumpeted re-convened summit on Wednesday and some sort of announcement.

The markets decided to give them the benefit of the doubt on Friday as much in desperation for good news than anything else and we saw a decent move higher in the Euro and stock markets. This has been continued in Asia and we’ve seen a squeeze on EURUSD to test strong resistance around 1.3935-50 and 1.6000 on GBPUSD which are both now crucial levels to hold if we aren’t to head sharply higher.

The last hour though has seen some degree of fall-back to 1.3865 and 1.5955 respectively and the FTSE is off its highs of 5548 and back to 5495. Whether we see a further move lower from here as traders get the jitters is still debatable but we can certainly expect a lot of two-way business in volatile conditions ahead of Wednesday. Seems like we take that for granted nowadays though huh?

The Pound continues to be a mixed bag at the behest of others and EURGBP is seeing good two-way business within relatively tight ranges caught up in the bun fight going on elsewhere

The BOJ has been banging on again about the Yen’s appreciation and threatening to intervene but USDJPY remains around 76.25 having dropped to all time lows of 75.75. And talking of intervention we’ve seen nothing and heard little lately from the SNB regarding the Swiss Franc and traders are now positioned more neutrally, me included. Support comes in around 1.2210 and 1.2160 on EURCHF but we’ve seen good sellers above 1.2300 already today. Always expect the unexpected on this pair though….

Little in the way of data but German Chancellor Merkel is due to update her parliamentary groups around lunchtime so we’ll be glued to the news wires for that and other scraps from the table.

As for my Friday forecast/wish-list, the mighty Shrimpers got 3 points and the All Blacks just got past the French so 2 out of 3 ain’t bad…!

It’s also half-term week here in the UK so liquidity will be a little thin, and I’m going to let the EZ leaders save the world while I take the opportunity to help my eldest daughter with her house move in Devon.

I will probably send one more update tomorrow and then should be back at my desk to post something on Friday when we’ve all had a chance to digest Wednesday’s outcome, but I’ll be keeping in touch with what’s going on of course and will be on my mobile and picking up emails should you need me or want to place orders.

Have a good week one and all. There’s no doubt it will be eventful, but we wait to see whether it delivers what we need….

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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 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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