Mike Paterson’s daily Forex brief

I said yesterday that traders wouldn’t be holding any positions for too long and so it’s proved with a complete turn-around in sentiment again following Fed Chairman’s Bernanke to signal any immediate monetary easing.

The Euro had started the day in relatively bullish mode with talk of European banking union and a bailout for Spanish banks, then the Pound got a lift from the Old Lady’s decision to keep interest rates and QE on hold, but all that changed a few hours later as Mr B disappointed these desperate markets.

EURUSD had rallied to the strong resistance line at 1.2625 where I had warned that sellers lay in wait and was sitting just below that level as Bernanke testified. Almost immediately we saw a move back to the 1.2570 pivot, then a bounce back above 1.2600 but then a fresh wave of selling as the risk-off sentiment kicked in once again. Overnight we’ve broken down through strong lines at 1.2525 to hit lows this morning of 1.2480. What a difference a day makes eh?

And it was the same story on GBPUSD which had rallied post-BOE to 1.5580 only to fall back and so far this morning we’ve seen lows of 1.5419. Overall though the Pound has made some gains with the risk-off sentiment hitting the commodity currencies harder and GBPAUD has been back over 1.5700 while GBPCHF has benefitted from the USD buying to almost touch 1.4900 again.

EURGBP has understandably been up and down like the proverbial but still in the 0.8060 (1.2407) to 0.8110 (1.2330) range reflecting the tight relationship of this pair and reaction to any Eurozone pressure.

Yesterday the Anglo-German talks gave both sides a chance to state their position which effectively remains as far apart as ever, and so the Eurobond debate continues. And adding to the global gloom has been an interest rate cut from the Chinese the first since the global crisis kicked in 2008, suggesting that all is not well with a country that has been revealed to have tripled its investment in Europe over that time… The words “card”, “of” and “deck” spring to mind as I have oft warned on these pages….

This morning sees UK PPI which has seen traders trimming positions ahead of the release at 09.30 BST while this afternoon brings us the latest US Trade Balance data.

Forex Update-The Economic Voice Limited

Forex Update-The Economic Voice Limited

And with the 3rd Test Match currently washed out attention turns to Poland and Ukraine and the start of the Euro 2012 football championships today, which has already provoked large dollops of controversy over alleged racism. And now the UK government says they’re not going to send any ministers to the team’s group games in Ukraine because of human rights issues. Gotta be a lot of disappointed boys in Whitehall unpacking their diplomatic bags on that one.

If you’re one of those out there that think we stand an earthly chance of showing well then don’t forget to check a brilliant blog written by a good friend of mine who shares your blind faith. (http://englandtilidie.wordpress.com/.)

Me? I’ve spent far too long following Southend United FC to be anything but realistic, but of course I’ll be shouting on our boys and hoping for a feast of great football. Beats looking out the window as the rain pours down….

Have a great week-end, whatever you’re up to.

Interbank Rates 08:48 BST

Currency Pair

Current

Overnight

High Low
EUR/USD 1.2486 1.2575 1.2480
GBP/USD 1.5440 1.5538 1.5419
EUR/GBP 0.8091 0.8099 0.8074
GBP/EUR 1.2361 1.2386 1.2345
GBP/CHF 1.4848 1.4876 1.4827
GBP/AUD 1.5679 1.5744 1.5646
EUR/CHF 1.2010 1.2015 1.2008
GBP/HKD 11.9706 12.0466 11.9643
EUR/HKD 9.6841 9.7582 9.6595
GBP/ZAR 13.0564 13.0891 12.9497
USDJPY 79.24 79.77 79.17
GBPCZK 31.5532 31.5882 31.1816

Today’s Data: BST

09.30-UK- PPI Input/Output

13.30-US- Trade Balance

15.00-US- Wholesale Inventories

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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