Despite everything, the Euro continues to attract buyers as a risk-on currency and aided as usual in no small way by further buying on the dips by Asian Central Banks for USD diversification.


EURUSD is back up at 1.4470, just shy of the key 1.4500 level while EURCHF is higher at 1.1445 despite huge selling by Swiss names yesterday.

Combined with this love of the Euro (it’s a funny ol' world but demand exceeds supply – end of) we've seen another slap down on GBPUSD as investors think twice about parking their funds in the UK -not a surprise to regular readers of this column- and we've seen the pair dumped to 1.6350 where buyers on technical support have emerged.

EURGBP has therefore moved higher on the back of these moves but there have been quality names buying long positions in the pair too so it's not just by default. EURGBP is up to 0.8835 (GBPEUR down to 1.1320) having broken strong short-term resistance lines at 0.8815-25. Whether it has the momentum to stay up here in these thin markets still is debatable but there is no doubt that the usual end-of-month buying will underpin the pair on any dip.

Overall the Pound is lower and my mantra of "sell GBP rallies" prevails once more.

As the risk-on sentiment prevails so Gold has lost its sheen (relatively speaking of course) and we've seen a sharp move lower to $1730 from the heady record highs of $1912 earlier this week. The move has been down to a combination of the CME adjusting margin requirements and talk yesterday that some of the PIIIGS were selling gold to raise collateral. (I think I'd rather have gold than Eurozone bonds.) . Whatever the truth in the latter both have certainly had an impact and we are now back down to levels where China put the brakes underneath before the last series of rallies. We wait to see whether they come back in. If not then the short term holders of gold positions might get spooked a little further.

Stock markets are doing ok in the current environment but I can't help thinking there's another fall coming as the rallies lose momentum.

Not much in the way of data today but all eyes are focussing (outside the Eurozone at least) on the speech tomorrow at 15.00 BST at Jackson Hole by Fed Chairman Bernanke. Talk on the streets is that he will not be going for QE3 and this is being factored in, so stand by for a reversal should he plump to go the other way.

Another scrappy and confusing day ahead in the wonderful world of foreign exchange.

Today's Data:

Weekly Economic Calendar-HERE

Interbank Rates as of 08.48 BST

Current Price

Overnight

High

Low

EUR/USD

1.4473

1.4475

1.4390

GBP/USD

1.6388

1.6398

1.6350

EUR/GBP

0.8835

0.8836

0.8793

GBP/EUR

1.1327

1.1373

1.1316

GBP/CHF

1.2984

1.3058

1.2962

GBP/AUD

1.5661

1.5704

1.5617

EUR/CHF

1.1463

1.1499

1.1445

GBP/HKD

12.7060

12.7140

12.6770

GBP/ZAR

11.8584

11.9303

11.8445

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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