Mike Paterson’s daily Forex brief
Seems we still can’t get up enough steam one way or another to break out of these tight ranges and traders appear content to sit and wait for clearer signals. Good and bad news from around the globe are nullifying price moves, and some.
Yesterday the Euro moved higher after the ECB’s Couere reminded us that the Securities Market Program remains in force and that it could be used to assist Spain, whose bond yields are giving cause for concern.
Spanish and Italian yields fell sharply in Europe but closed off their lowest levels. Spain ended at 5.87% in the 10-year maturity while Italy ended at 5.54%.
EURUSD has been up to 1.3151 but there is talk that the BIS (Bank for International Settlements) has a large sell interest up there and talk is that this might be related to the SNB’s intervention in EUR/CHF last week. The SNB must diversify part of their purchases (between â‚¬ 7-8 billion) by turning about 70% of their total EUR purchases mainly into USD but also into GBP and JPY. They prefer to do this through the BIS rather than going straight to the market as their credit lines are getting full with many banks that they trade with.
This operation/need goes some way to explaining the pressures on EUR/GBP and EUR/JPY over the last few days. EURCHF remains in a tight range just above 1.2000 but there is a growing school of thought that says the SNB might have to lift the peg to 1.25-1.30 if the pair fails to make further gains under its own steam.
Yea, we’ve heard that before but still have to bear it in mind GBPUSD has been steady above 1.5900 but failing to make any progress through a raft of sell orders between 1.5950-70 and the various cross trading has injected rigor mortis into EURGBP.
The Aussie $ has made a decent recovery following better than expected employment data and we’ve seen AUDUSD rally from the 1.0230 area I mentioned yesterday to take out stop-loss orders at 1.0350 and 1.0375. This is turn has dragged EURAUD lower and GBPAUD down to 1.5310, 200 tics lower than its recent highs seen just 24 hours ago.
Chinese GDP and Industrial Production will be eagerly awaited tonight and we’re sure to see some action on the back of it but apart from that there’s little on the horizon to stir traders into action.
Data just out shows worse than expected UK trade figures but we’ve seen little reaction thus far. Yawn…..
And there’s little to report from the sports pages apart from United losing and City winning but with Mancini still resigned to missing out again (perhaps he fancies a gig back home.); and Steve Davis has once again failed to qualify for the final stages of the World Championships. His last triumph was in 1989 and is now ranked 39th in the world.
Bilge; as if these markets weren’t depressing enough it’s now time to feel old too…….!
Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.