Mike Paterson’s Daily Forex Brief
The fickle finger of foreign exchange strikes again, and from this time yesterday when traders were running out of patience with ECB President Draghi their confidence of him making a move on bonds today returned and from risk-off it was smiley faces all round again-ish!
EURUSD did indeed take a look at the strong support/barrier option at 1.2500, touching 1.2501 but once that held traders were quick to take some profit. Add to that a heady mix of more leaks from Draghi’s on-going talks about his plan to cap bond yields of particularly Spain and Italy, with the ECB buying unlimited bonds and we saw EURUSD climb ever higher to an overnight cap thus far of 1.2631, ahead of decent sell orders between there and 1.2650 which I’ve reported before.
EURGBP was heading lower as I signed off but had the support lines at 0.7880 to overcome still and guess what, yep, it failed and as I also suggested yesterday it followed EURUSD all the way back up towards its recent highs, so far capping at 0.7939 (GBPEUR dropping to 1.2593). Fickle as fickle can be Blackadder…..!
GBPUSD has been a relative bystander but having found a few buyers around the technical support of 1.5830 we’ve seen a move back up through 1.5900 which it’s clinging to as I type.
It’s a big day for President Draghi who at this very moment is trying to convince some of his council members of the merits of his proposals. ECB Governing Council member Weidmann, who also heads the Bundesbank, considered quitting over the scheme but was dissuaded from doing so by his country's government. His predecessor Axel Weber resigned last year over the ECB's first bond purchase program.
It’s another can-kicking exercise by the ECB to buy time for a better solution while pressures remain on an increasing number of its member states, but it might just get through for that reason alone.
So it will be no walk in the park for “The Draghi Plan” but the expectation is now is that we will hear about its implementation at the 13.30 press conference. One US bank has put out a paper this morning suggesting the ECB might even cut rates by 0.25% but that’s not a commonly held view.
Let’s not forget our own little piece of theatre at mid-day when the BOE are expected to announce an unchanged decision on rates and QE but hey, we’ve got problems of our own and further easing cannot be ruled out completely, if not today then soon.
So a lively and perhaps water-shed moment for the markets today and Gold too has staged a burst through the $1701 resistance line to currently sit at $1710 with $1750 the next target. Expect some relieved longs though to pack away some profit before then.
Meanwhile back at the Wheelchair Basketball our man Terry, top scoring on 23 points, inspired GB to a thrilling 75-70 victory over Turkey to make the semis and a chance to gain revenge against Canada for a defeat in the group section. Come on the good guys!
And talking of semi’s Andy Murray fought back from a set down and 1-5 versus Cilic to make the US Open last four. Can he possibly go all the way this time?
Interbank Rates at 08:40 BST
Today’s Data: BST
10.00-EU- Eurozone GDP Q2 Final
12.00-UK – BOE Interest Rate Decision
12.45-EU – ECB Interest Rate Decision
13.15-US – ADP Employment Change
13.30-EU – ECB Press Conference
13.30-US – Weekly Jobless Claims
15.00-US – ISM Non-Manufacturing Index
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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 firstname.lastname@example.org
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.