Mike Paterson’s daily Forex brief.

It's a (not so) funny ol', fickle ol' world eh? Why does it take the unseasonal pantomime we've just witnessed in the US for the markets now to tremble at the thought of the world's largest economy (20% of all global trade which is more than the Eurozone combined) going down the tubes. Hasn't it been glaringly obvious for some time as I've written/warned on many occasions?


Forget double-dip recessions (that will be the least of our worries) with the world now seemingly agreed that severe cuts are the way to go (rightly or wrongly but a fact given the legacy of the past 20 years) can anyone out there explain why we should have any reason to believe we can get out of this mess when there is no spending at any level to generate growth?

And as China continues to protect its huge investment/gamble in the US and Eurozone they will have serious problems unless they develop their own domestic economy when ultimately (and perhaps before too long) there is no one anywhere else to trade with…….

So now that you've all climbed back under the duvet, or literally buried your head in the sand whilst the kids pretend it’s a sand castle, let's have a quick review of the past 24 hours in the Forex markets and elsewhere…..

Shhimmples………Carnage……….

EURUSD went up 100 points yesterday morning, took out the stop-loss buyers on the top side, then came back down just as rapidly to take out the stop-loss sellers on the down side before our Asian friends came in and hoovered up yet again… Following me so far?

Similarly EURGBP bounced back off of the 0.8700 support line that I mentioned and hit resistance around 0.8760 (GBPEUR down to 1.1420) before falling back overnight to 0.8695 (1.1500) only to bounce back up again to 0.8760 (1.1420) this morning when the SNB announced measures to stem the flow of funds into the surging Swiss Franc.

EURCHF had got trashed again and overnight went down to new record lows 1.0794 forcing GBPCHF down to 1.2394 before the SNB came out with the aforementioned strong rhetoric and measures but have yet not been seen intervening directly.. Anyhow it's had the desired short-term effect and we've seen a rise of 300 points back to 1.1100 and 1.2706.

Gold has surged to record highs of $1673 and equity markets have fallen again as I've forecast they must, with the FTSE down as low as 5610 this morning before bouncing back to 5654 and the Dow seeing 11, 818 before a similar bounce.

Adding to the mayhem are renewed fears of Eurozone debt contagion into Italy and Spain… shock……..

It's a real mess out there, exacerbated by thin summer liquidity, but it's not going to get any better. How can it?

04_28_40_prevI'm no rocket economist, just a humble (mostly) FX trader who walks around with his eyes and ears open and it's not pretty on either sensory vehicle……

As they got told in Hill St Blues before daily patrol, " …. Let’s be careful out there…….."

Today's Data:

09.30-UK- Services PMI

10.00-EU- Eurozone Retail Sales

13.15-US- ADP Non-Farm Employment Change

15.00-US- ISM Non-Manufacturing Index / Factory Orders

Interbank Rates as of 08.37 GMT

Current Price

Overnight

High

Low

EUR/USD

1.4274

1.4277

1.4277

GBP/USD

1.6300

1.6319

1.6250

EUR/GBP

0.8757

0.8759

0.8695

GBP/EUR

1.1415

1.1503

1.1413

GBP/CHF

1.2658

1.2706

1.2394

GBP/AUD

1.5126

1.5225

1.5093

EUR/CHF

1.1072

1.1105

1.10794

GBP/HKD

12.6380

12.6530

12.5990

GBP/ZAR

11.0446

11.1470

10.9960

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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