Mike Paterson’s daily Forex brief

Yesterday I said we’d see good two-way business in volatile conditions, and that’s exactly what we got with traders still trying to evaluate the quality of the previous day’s strong risk-on move.

It kicked off just as I finished my update with outgoing ECB President Trichet delivering his final Monthly Report and he didn’t pull any punches in his gloomy but realistic outlook for the Eurozone. He also stated that the ECB would not be a lender of last resort to EZ governments, which seems kinda strange for a central bank but hey, they’ve got a lot of dead wood to support. This reality check of course sent the Euro sharply lower but not enough to break down through the previous day’s pivot line and we soon saw consolidation as various pieces of rhetoric gave hope to those more bullish on the current scenario, including a few model funds and the usual Asian sovereign interest.

From looking a little wobbly in the morning we then saw another breach of 1.3800 on EURUSD only to fall back then only to have another go above that level in Asia. And guess what? Yep, it’s fallen back again this time to 1.3755 as I type.

The Pound eventually took some comfort from the slightly better than expected trade data and we saw an attack higher on GBPUSD to 1.5800 before falling back and it’s followed the same pattern as EURUSD since then which means EURGBP has traded in a tight range with demand at 0.8705 (GBPEUR sellers at 1.1487) and offers at 0.8755 (buyers at 1.1422). 0.8785-0.8800 remains a strong resistance area but a breach of that should see a sharp move higher. Talk on the street of a large GBPUSD 1.5800 barrier option interest which is definitely containing any move higher for the moment.

Overall the Pound has done little to impress and we’ve seen sideways consolidation against most other currencies.

The early sell-off in the Euro gave cause for traders to sell out their long EURJPY positions from the previous day but a failure to breach the key 105 level gave good enough reason for consolidation, but not without knocking USDJPY off it proud perch above 77.00 having taken weeks to get there. Strong hedge fund and prime name interest to buy above 76.50 though has helped it move back up but also back into its usual tight two-way trading pattern.

EURCHF continues to find support around the 1.2325 level I’ve mentioned and bounced off that area 3 times yesterday only to cap at 1.2380.

Stock markets dug in deep and proved resilient as did Gold but with neither able to build on the previous days’ gains it remains to be seen whether there is enough momentum at the end of the week to drive everything higher again.

Various data releases should keep the traders fed on scraps and its Friday so we can always expect some fun and games before heading out to play for the weekend.

And talking of which the mighty Shrimpers will be seeking their 6th league win in a row in front of a sell-out crowd of around 9500 at the fortress that is Roots Hall. Ok, so they’ve dropped the price of all tickets to £5 but we still have one of the most loyal fan bases throughout the leagues, and an eye for a bargain of course!

Have a great weekend wherever it takes you.

Today's Data:


Live Economic Calendar Powered by Forexpros – The Leading Financial Portal

Weekly Economic CalendarHERE

Interbank Rates as of 08.38 BST

Current Price

Overnight

High

Low

EUR/USD

1.3755

1.3816

1.3723

GBP/USD

1.5755

1.5797

1.5721

EUR/GBP

0.8732

0.8757

0.8720

GBP/EUR

1.1448

1.1468

1.1417

GBP/CHF

1.4159

1.4181

1.4123

GBP/AUD

1.5457

1.5517

1.5405

EUR/CHF

1.2364

1.2380

1.2352

GBP/HKD

12.2148

12.2474

12.1884

GBP/ZAR

12.3997

12.3990

12.3092

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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