Mike Paterson’s daily Forex brief

We’ve seen a significant reversal of last week’s bearish sentiment in Asian and early European trading after strong retail sales data from the US on Friday and rumours of an IMF loan to Italy of EUR 600 billion. There is also a sense that France and Germany might be stumbling their way towards some sort of a solution and/or compromise but we shouldn’t get too excited about that just yet.

Although the chances of the IMF story being true were slim on the grounds of where the IMF were going to fund it from, and a denial was finally made anyway, it was enough to cause some rapid short-covering in thin Asian markets both in the Euro and noticeably the Aussie which had perhaps been more oversold in last week’s fall. And even since the denial and a sharp drop we’ve seen further climbs and consolidation, all relative of course.

In a very busy and volatile morning EURUSD has moved up to 1.3393 from 1.3238 lows and is now looking to test strong resistance around 1.3420 while the Aussie has made sharp gains across the board climbing to 0.9945 v the US $ and 1.5640 v GBP from 0.9705 and 1.5907 respectively.

GBPUSD has been caught up in all the action too and has been extremely volatile in a 1.5435-1.5582 with traders getting caught long and short, while EURGBP held the 0.8550 support line I mentioned (GBPEUR resistance 1.1695) and is now challenging the 0.8610 (1.1614) pivot line. Talk of offers up here in GBPUSD may well be significant therefore but there is talk of a decent GBP buy interest at today’s 16.00 GMT fixing for the MSCI semi-annual review. Bear in mind also the usual month-end buying of EURGBP.

Daily Forex Brief

Daily Forex Brief

Further rumours out a little earlier relating to the AAA rated Eurozone currencies issuing an “elite” bond also helped the more optimistic mode but this has since been denied. Interestingly though despite the denials they’ve not yet really dented the rally, so it’s either a case of no smoke without fire or traders a little scorched by this overnight turnaround.

Gold and equities are joining in this positive start to the week but as with everything else it’s all relative given last week’s solid decline and we’ll perhaps know a little more over the next 24 hours, but for now discretion would most certainly be the better part of valour.

Have a good week.

Today's Data:

11.00-UK- CBI Distributive Trades Survey. / EU- German CPI

12.00-EU- GFK German Consumer Climate

15.00-US- New Home Sales

Weekly Economic CalendarHERE

Interbank Rates as of 08:17 BST

Current Price

Overnight

High

Low

EUR/USD

1.3384

1.3393

1.3238

GBP/USD

1.5572

1.5582

1.5435

EUR/GBP

0.8595

0.8614

0.8568

GBP/EUR

1.1631

1.1672

1.1607

GBP/CHF

1.4355

1.4406

1.4234

GBP/AUD

1.5700

1.5907

1.5693

EUR/CHF

1.2339

1.2373

1.2304

GBP/HKD

12.0249

12.0373

11.9667

EUR/HKD

10.3386

10.3707

10.2525

GBP/ZAR

12.9527

13.2350

12.9484

USD/JPY

77.76

77.78

77.78

GBP/CZK

3.0052

3.0462

3.0039

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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