It’s risk-on trading again as Eurozone officials appease the markets for the moment

Mike Paterson’s daily Forex brief

Over the weekend European finance officials promised a “decisive” solution to the Eurozone debt crisis as European leaders prepare for a crucial meeting in Brussels on October 23rd.Following two days of talks by finance ministers and central bankers from the Group of 20 leading economies, Eurozone officials said key elements of the solution had taken clear shape, while not disclosing any major details.

Nothing new in that then but the markets have once again taken some comfort from the rhetoric and its back to risk-on trading with the Euro, commodity currencies and stock markets all higher. EURUSD is trying to take out the 1.3900 barrier option sell interest as I type while EURGBP has again tried to breach the 0.8785 resistance (GBPEUR support at 1.1383). EURJPY is back up to 107.50 despite the BOJ taking no Yen-weakening action as yet, although there have been some good names buying USDJPY in the last half-hour or so. A large barrier option sell interest at 77.50 is once again capping the move having tried to get through there on Friday afternoon. Plenty of sellers lined up on EURUSD too between 1.3900-1.3950.

The Pound has once again lagged behind and although GBPUSD has climbed back above 1.5800 this morning, we seen other GBP pairs trade lower (see rate table) as traders continue to give the cold shoulder to our supposed safe-haven.

Stock markets have opened strongly on the back of the new-found optimism on Europe (this member of the jury is definitely still out on that one but no point trying to fade a trend as I have oft said) and the FTSE has just breached 5500 as I type, while Gold is challenging the $1700 level once again. This is traditionally a strong period for the shiny stuff due in no small part to the Indian wedding season but it will be interesting to see what happens after that huge demand tails off. India's wedding season runs from late September to December. Over the past decade, gold has risen by an average of 10.1 per cent from September through to December. Apart from weddings, Indian jewellers also buy the gold for the Hindu festival of Diwali, or the Festival of Lights.

Little in the way of data today so we’ll go into the week (wow, are we really half-way through October already ?) trading off more rhetoric/hot air ahead of tomorrow’s key UK inflation and German ZEW data.

And the mighty Shrimpers bravely forced a late equalizer on Saturday against 10 men (!) but lose their place at the top of the leader board for the moment. And the Welsh family history in me says I hope the All Blacks totally stuff the French on Sunday!

Have a good week out there.

Today's Data:

Live Economic Calendar Powered by Forexpros – The Leading Financial Portal

Weekly Economic Calendar–HERE

Interbank Rates as of 08.38 BST

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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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