Mike Paterson’s Daily Forex Brief
Traders were firmly on the back foot come Friday afternoon as concerns grew that “fiscal cliff” talks between President Obama and John Boehner, the Republican speaker of the House of Representatives, are still far from finding an amicable solution.
The so called “fiscal cliff”, Obama’s plan to raise taxes and cut spending from January while averting a heavy fall over the edge, has global implications.
Obama has invited congressional leaders to the White House this Friday to discuss the issue, the most pressing challenge as the President prepares to starts his second term in office. He will also hold a news conference on Wednesday. John Boehner, in response, repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the crisis.
Cue another wave of gloom casting its shadow over markets already back in reality-check mode and we’ve seen further risk-off trading in currency prices and equity markets.
EURUSD has flirted with sub-1.2700 levels again but so far the buyers down there seem to be preventing further losses and we’re currently at 1.2715. Sellers are lined up around 1.2740.
But it’s the Pound that has played catch-up and taken the brunt of the bad karma that currently prevails. GBPUSD has been down to 1.5878, the lowest level since late-August, dragging other pairs down with it.
GBPCHF has been down to 1.5055, and GBPAUD down to 1.5238 despite growing market talk that the RBA will cut interest rates again in December.
EURGBP, meanwhile, seems to have given up its assault on the lower support lines around 0.7960 (GBPEUR resistance 1.2562) and headed back up through 0.8000 (1.2500) as GBPUSD struggles to move back above 1.5900. There is talk of EURGBP sellers lined up for the 11.00 GMT fixing but as in all fixing rumours this will probably be front-run and there could be a danger of a spike higher should a decent-size sell interest not manifest itself.
Gold continues to bounce back from the support levels around $1665-75 that I highlighted last week and is now challenging resistance at $1740 again ahead of the pivotal $1770 level from whence it fell previously and also forecast here.
Nothing of note by way of data today, so we’ll just be having the usual Monday malaise unless the newswires produce any scraps to liven up the feeding trough.
And we’re not going to get greedy about the mighty Shrimpers of Southend only getting a point on Saturday given that it was against second-placed Port Vale and it still inches us up the table to the heady heights of 11th. But I tell you, it’s tight up there!
There was plenty of other great sport to be had over the weekend with the start of the Autumn rugby union internationals, the finals of the ATP Tennis Masters to be concluded today, and an exciting batch of Premier League football to boot, as it were.
Hey ho, time to go back to the reality of making a living eh?
Have a good week out there.
Interbank Rates at 08:44 BST
Today’s Data: BST
Nothing of note.
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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 firstname.lastname@example.org
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.