Mike Paterson’s Daily Forex Brief
We’ve seen some further US budget talks but also some further bickering, and the USD has come under fire again in what are thin pre-Xmas markets that offer little real fundamental explanation.
The old adage “the trend is your friend” has camped in for the festive season and there seems little to chase it away just yet.
EURUSD has finally broken up through 1.3230 and now targeting early-May highs of 1.3270. Above that there is little technical resistance before we get to March highs of 1.3386 but I’m hearing talk of a barrier option in place at 1.3300 which will be defended. Support now in the dips all the way down to 1.3150, as I’ve been saying for a while.
EURJPY and EURGBP are also higher at 111.86 and 0.8145 respectively with lower Spanish bond yields also giving the Euro a helping hand and exacerbating the stop-loss buying. USDJPY is back up testing recent highs around 84.40 having retraced its original gains as the Yen continues to weaken in what is effectively a “risk-on” environment to quote this year’s overplayed phrase.
GBPUSD has also benefitted, albeit slightly behind the EURUSD move, and we look to be mounting a challenge on 1.6300 while AUDUSD is holding above 1.0500.
How long this trend continues remains to be seen. There’s talk of large Euro sales for dividend/repatriation purposes before year-end but they don’t appear to be kicking in just yet. Traders will not want too much to fight over for the next couple of weeks and will, themselves, be keen to protect their books from last-minute damage.
Stop Press: BOE MPC voted 8-1 to keep QE total on hold and 9-0 to keep rates on hold. Most MPC members agreed past month’s developments did little to alter QE position. Inflation is likely to remain above 2% over next year; upside risks to food prices from bad weather. Recent UK economic news is mixed, sees Q4 contraction, broadly flat near-term output. Risks from euro zone less pressing, but worse UK competitiveness may hamper UK exports.
Interbank Rates at 08:48 BST
Today’s Data: BST
09.30-UK – BOE MPC Minutes
11.00-UK – CBI Distributive Trades Survey
13.30-US – Building Permits / Housing Starts
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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 email@example.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.