Mike Paterson’s daily Forex brief
Last night I reported the US Fed’s surprise move to signal a far more accommodative stance on monetary policy and stating that interest rates would remain low well into 2014 to combat poor growth prospects and highlighting concerns on the rate of unemployment and sluggish housing sector.
This move totally caught the markets on the wrong foot and we saw EURUSD, having briefly traded below 1.2950 and still looking soft around 1.2980, rise rapidly to break through the key 1.3080 level I’ve been banging on about and clear out more sell orders at 1.3100 before dipping back to 1.3045. However, as the full extent of the US tone made impact then we’ve seen another scramble in late NY trading back above 1.3115 and since then in Asia and early Europe have looked well underpinned.
The USD has been sold across the board with GBPUSD clearing out decent sell orders to reach 1.5700, USDJPY undoing a lot of the recent buying to fall from 78.35 to 77.52 and AUDUSD needing no excuse to motor higher to 1.0668 as I type.
The move in the Euro shows how short the market had got itself again and while the Eurozone is by no means a better place this morning the currency at least is finding good support with more buyers as I type, with EURUSD up to 1.3160 to perhaps challenge strong resistance at 1.3200, EURGBP moving back up toward 0.8400 and EURJPY looking to clear 102.00
Gold leapt through $1700 on the Fed news and now faces the next key resistance at $1720. This move higher in January has defied a lot of forecasts which predicted further falls before rising later in the year but is understandable given the natural physical demand I’ve mentioned and the prospect of low interest rates for a long while yet.
Markets will now focus on the US jobs and housing data this afternoon which will take on even greater relevance now, whilst they continue to also react to the barrage of Eurozone rhetoric.
Suddenly the goal posts, always temporary in these uncertain times, have now been moved quite significantly it would appear. For how long remains the key question.
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