Is Santa’s imminent arrival the only bright spot left?

We’ve seen some sort of pause in this week’s rapid Euro decline but not without EURUSD having first hit 1.2945 yesterday, its lowest level since January, and we’ve still got sellers queuing up around 1.3050 as I mentioned. So the descent is by no means over just yet and the target area of 1.2875 for this move is still dangling temptingly for the bears.

EURGBP is currently falling to 0.8377 (GBPEUR up to 1.1937) having rallied to 0.8426 (1.1868) overnight with the Pound seemingly shrugging off yesterday’s awful employment data. The fact that the figures were better than forecast shows at least there is a sense of reality kicking in and this worsening position is no longer causing any surprises, but this doesn’t make the reality any better.

GBPUSD has been as low as 1.5433 in this generally risk-off scenario and has since rebounded a little but still has sellers between 1.5530-50. Overall the Pound is holding in there still making gains against the more vulnerable targets like Aussie and Rand as Gold continues its move lower having broken down rapidly through strong technical support around $1620  We’ve been as low as $1564 so far holding the next support line at $1550.

The bearish feel on commodities and feeling of unease around the world generally will not have been helped by Chinese stocks flashing extreme warning signs. The Shanghai index has fallen 30% since May. It’s down 60% from its peak in 2008, almost as much in real terms as Wall Street between 1929 to 1933. Property prices in China are falling rapidly too, as much as 35% in the last month if latest figures are to be believed, and the reality of the bubble bursting as global demand dries up is starting to kick in. Not good news for them and even worse news for the rest of us as our knight in shining armour riding to the rescue looks to be having its horses legs shot away one by one      .

FX Update

EURCHF, GBPCHF, and USDCHF are all lower as the SNB this morning kept the peg at 1.2000 disappointing a lot of traders short in CHF who were looking for 1.2500 or even more. We’ve seen the anticipated shake out to 1.2253 on EURCHF as the SNB tells us that the 1.2000 has done its job so far in stemming the Swiss Franc’s rapid appreciation  Stop-loss sell orders below 1.2225 may well now trigger a further move lower especially if the bearish Euro tone prevails.

Loads of data out today (see table below) so we should expect a busier time than yesterday, but there is definitely a feeling in the markets that after a tumultuous 2011 traders are worn and torn and Santa can’t get down that chimney fast enough.

Today's Data:

09.30-UK- Retail Sales

10.00-EU- Eurozone CPI / Eurozone Employment Change

11.00-UK- CBI Industrial Trends Orders

11.25-EU- ECB President Draghi speaks

13.30-US- Current Account / PPI / Weekly Jobless Claims / NY Empire State Manufacturing Index

14.00-US- TIC Net Investment Flow

14.15-US- Capacity Utilization / Industrial Production

15.00-US- Philadelphia Fed Manufacturing Index

Interbank Rates as of 08:42 BST

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.

Comment Here!

comments