Mike Paterson’s daily Forex brief

Yesterday I signed off by saying we would see some action soon enough despite the post-Xmas lull and we didn’t have to wait too long.

The proverbial hit the fan as US markets opened for the day, starting with GBP and EUR then spreading to a general risk-averse trading sentiment. There was no obvious or particular reason for the moves but a number were cited including the ECB’s expanding balance sheet, apprehension about today’s Italian debt auctions and rumours of sovereign downgrades.But most likely it had as much to do with it being the last day to settle FX trades before the New Year and funds waiting until the last minute in a vain hope for better returns.

This appears to have been the case for liquidation in GBPUSD, which led the move lower, and having broken strong support lines around 1.5640 we moved rapidly down through 1.550 and 1.5500 to hit lows of 1.5422 where I’m told there is a lot of buying to done which has so far soaked up some selling but providing little in the way of a rally.

EURUSD fell too and we were soon breaking down through the lows of December so far around 1.2980 having started the day at 1.3070… Once we were through the previous lows there was little support ‘til 1.2900 and we’ve been as low as 1.2886, just ahead of strong buying interest and we’ve since rebounded back up to 1.2944 before capping again.

Forex Brief Thu

FX Update

With GBPUSD leading the way we saw EURGBP move back up to the post-Christmas high of 0.8378 (1.1936) and we’ve since held the 0.8350 pivot level on any retracement. With both GBPUSD and EURUSD finding buyers after the sharp move lower it remains to be seen which will remain under the most pressure today.

There’s also been talk of more hedge funds closing down and liquidating profitable positions in metal which saw gold falling $41, or 2.6%, to $1553 – the lowest since September and Silver also down 6% to the September pivot levels. The key $1550 support line on Gold held previously but we’ve seen lows this morning of $1543 and look poised to test the next raft of buying interest down to $1500.

Little in the way of European data this morning but the Italian debt auction results are due shortly to keep things ticking over, and then this afternoon we have data from the US to add some fuel.

I reckon we’ve got some more volatility to come before the week, and year, is out.

Today's Data:

13.30-US- Weekly Jobless Claims

14.45- US- Chicago PMI

15.00- US- Pending Home Sales

Interbank Rates as of 08:45 BST

Current Price

Overnight

High

Low

EUR/USD

1.2920

1.2944

1.2887

GBP/USD

1.5433

1.5477

1.5422

EUR/GBP

0.8375

0.8383

0.8349

GBP/EUR

1.1937

1.1979

1.1927

GBP/CHF

1.4552

1.4604

1.4538

GBP/AUD

1.5295

1.5374

1.5274

EUR/CHF

1.2185

1.2203

1.2178

GBP/HKD

11.9652

11.9993

11.9567

EUR/HKD

10.0236

10.0553

9.9814

GBP/ZAR

12.5635

12.7297

12.5498

USD/JPY

77.76

78.00

77.67

GBP/CZK

3.0810

3.0934

3.0648

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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