Mike Paterson’s daily Forex brief

A lively 24 hours with the ECB holding fire on interest rates, but then the Euro falling after Draghi gave a bleak outlook at the press conference suggesting that monetary easing could not be ruled out. Later in the day however came news of a bailout plan to be announced to help the ailing Spanish banks and the oversold Euro came bouncing back with a vengeance.

EURUSD had fallen to the strong 1.2440 support lines again on Draghi’s comments including the admission that some ECB members wanted interest rate cuts this time, but by the NY close we’d seen a rally back to 1.2585, forcing EURGBP back up from a dip to 0.8059 (GBPEUR up to 1.2408) to a high thus far of 0.8132 (1.2295).

Adding fuel to this rally and a generally better risk sentiment was further talk from US Federal Reserve members about monetary easing and traders squaring positions ahead of today’s eagerly awaited testimony from Fed Chairman Bernanke at 15.00 BST where many forecasters predict he will announce further easing measures.

First up though is the BOE interest rate decision at 12.00 BST and whether the MPC feels the time is now right for more QE as has been the clamour of late. Services PMI data just released shows a better than expected 53.3 versus 52.5 forecast and the Pound is staging a small rally as a result.

Good two-way business at these levels across the board and this pattern should continue for the morning session. EURUSD has a large option expiry at 1.2525 this afternoon which might be targeted but equally defended, but there’s also plenty of sellers on rallies towards 1.2600 and 1.2625.

The Aussie $ has found support again from better than expected jobs data and the rise in Gold and we’ve seen AUDUSD test strong resistance around 0.9980 with GBPAUD falling yet again currently just off its overnight lows at 1.5533.

Forex Update-The Economic Voice Limited

Forex Update-The Economic Voice Limited

UK Prime Minister Cameron today meets with German Chancellor Merkel no doubt with a couple of messages to pass on from his new best buddy Barack, providing a useful ally at this critical stage of talks having alienated himself previously.

All in all then another busy day ahead but whether anything is actually done anywhere remains to be seen. But these are nervous times and traders will play hot-potato with their positions for sure.

We shouldn’t see much of that as England secure a comfortable 3-0 series win with the Third Test starting today, while footie fans await the start of Euro2012 tomorrow and Andy Murray heads back to wherever he lives these days after his French Open exit.

Let’s be careful out there.

Interbank Rates 08:48 BST

Currency Pair

Current

Overnight

High Low
EUR/USD 1.2550 1.2585 1.2540
GBP/USD 1.5451 1.5499 1.5429
EUR/GBP 0.8125 0.8132 0.8112
GBP/EUR 1.2308 1.2328 1.2295
GBP/CHF 1.4784 1.4808 1.4769
GBP/AUD 1.5533 1.5669 1.5517
EUR/CHF 11.9791 12.0163 11.9621
EUR/HKD 9.7328 9.7733 9.7023
GBP/ZAR 12.8467 12.9041 12.7986
USDJPY 79.29 79.49 79.15
GBPCZK 31.3050 31.4026 31.2492
EUR/USD 1.2550 1.2585 1.2540

Today’s Data: BST

09.30-UK- Services PMI

12.00-UK BOE Interest Rate decision

13.30-US- Weekly Jobless Claims

15.00-US- Federal Reserve Chairman Bernanke testifies

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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