Mike Paterson’s daily Forex brief

We’ve seen some wild swings in the past 24 hours due to large order flows on the Euro and an increased perception that the Bank of Japan is lining up to intervene and weaken the Yen.

So sooner was my ink dry yesterday with EURUSD moving toward key resistance at 1.3080 than we saw a very large sell order from a big hedge fund and this caused a rapid move lower eventually breaking 1.3000. With only a small rally from there and concerns mounting that the Greeks would not get their debt haircut we saw another move to the downside this time triggering stop-loss selling through 1.2985 and falling to 1.2952.

As before though it seems the whole world wants a piece of Euro action down there now and it wasn’t long before we found ourselves back above 1.3000 and overnight we’ve been to 1.3052, just ahead of good size sell orders now around 1.3055 ahead of the big 1.3080 level. Currently back down to 1.3020 and the volatility continues.

A main driving force in this Euro demand has been large technical covering on EURJPY which I’ve mentioned here frequently of late, since we came close to the key support at 97.00 and then turned back up through 98.00 and 100.00. The growing perception is that the BOJ will act soon to weaken the Yen again and this is triggering large JPY sales across the board. USDJPY has broken up through huge sell orders at 77.60 and 78.00 forcing EURJPY up to 101.89 so far.

Further EUR strength this morning has come from talk of

Swiss company Roche making a hostile bid of $ 5.7 billion for the US company Illumina INC, which is weakening the Swiss Franc this morning on the assumption that they will have to sell some for the deal, and being mainly reflected in a move in EURCHF up to 1.2110.

Also EUR positive has been a better than expected IFO Index number from Germany of 108.30. This shows business climate and has improved from 107.20 last month.

Forex Update

Forex Update

More data just out shows that the BOE voted 9-0 to keep rates and QE on hold but increased QE was discussed with some members seeing a need at some point, while provisional GDP data for Q4 showed minus 0.2% month on month and + 0.8 year on year. These were in line with expectations and the Pound had already been sold ahead of it. The lower growth figures come on the back of the IMF yesterday reducing global growth forecasts which will come as little surprise.

Tonight sees the latest interest rate decision from the US Federal Reserve which should remain unchanged but traders will, as ever, read the accompanying statement for clues to future policy.

Stop Press : The Euro volatility continues as I sign-off with EURUSD falling to 1.2977 and EURGBP down to 0.8341 (GBPEUR 1.1989) on comments by IMF’s Lagarde that the balance between private and public sector debt levels in Greek haircut talks is “ a concerning question”. No surprises there but it just shows how fickle and nervous these markets remain.

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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