North American equities closing in the red gave the Asian bourses little positive to go on and having traded most of the session with a sideways if not negative tone we walk in Tuesday to more of the same.
News overnight that Moody’s has downgraded another 8 Spanish banks, coupled with the fact that China has put an obvious proviso on the investment vehicle announced last week (they will look carefully at certain criteria being satisfied etc.) led to more sales in the EUR/USD. It tested 1.3180 overnight and then took out stops below to trade to an overnight low of 1.3160/65.
Other high beta currencies also took some pain and the overall USD side of the equation continues to look healthy as the DXY continues its consolidation and prepares for further upside.
EUR/GBP was the star performer in yesterday’s session, and while many pundits in the market here in London believe this price action was vindication of Cameron’s weekend veto, the reality of the situation remains that there were simply significant right hand side GBP flows associated with dividend payments. Technical levels in the EUR/GBP being breached clearly somewhat coloured this picture.
The day ahead holds little by way of important data, save for the following; UK CPI (which actually has the potential to surprise to the upside), the ZEW survey results for both Germany and Europe (it’s the same thing these days surely) and, of course, tonight we have the FOMC announcement. On the latter, I look for no change to the overall rhetoric and certainly no change to parameters of either rates or stimulus package. There is, however, the chance that the rate path as set out in previous meetings with a mid 2013 horizon will be extended (if not formally, then certainly in spirit) out to the end of 2013.
Levels for the major pairs remain in play as they were form the tail end of last week and the disappointment of a failed summit. The bias as noted above is for more USD purchases, however, and rallies in “risk” pairs serve as opportunities for traders to further fade strength.
In EURUSD the first port of call on a small squeeze this morning is the important 1.3250 pivot level, with stops assuredly sitting just above, while 1.3280/00 should prove to be a far more formidable mountain to ascend.
AUD/USD likewise will have initial difficulty above 1.0130/50, but if the EUR/USD decides to go for a headline driven run, then this pair too will have a look at 1.0200/30. Personally, I don’t rate its chances and the downside still remains the favoured directional play.
Cable becomes an enigma play today and best stood aside from. Various M&A and dividend flows seen over the last 5 or so trading days have meant that the pair has decoupled in the very short term from the rest of the market. But worth noting the incredible ability of the pair to hold the 1.5550 support level.
Keep an eye on EUR/AUD as this pair is in thin markets and, in the coming days especially, has the real potential of cleaning out significant stops sitting below historic lows at 1.3000 before roaring back with a vengeance. Many punters out there have used the quadruple bottom to get long over the last 2 weeks and no doubt many more will attempt to do so again now that we’re down here once more. An inability to exactly put my finger on why has my bones saying to me that we clean out lower before we resume the run higher.
Helmets on remains the overall strategy for forex traders. Just as they say only mad dogs and Englishmen go out in the midday sun - similar might be said about trading this Christmas market.
News overnight that Moody’s has downgraded another 8 Spanish banks, coupled with the fact that China has put an obvious proviso on the investment vehicle announced last week (they will look carefully at certain criteria being satisfied etc.) led to more sales in the EUR/USD. It tested 1.3180 overnight and then took out stops below to trade to an overnight low of 1.3160/65.
Other high beta currencies also took some pain and the overall USD side of the equation continues to look healthy as the DXY continues its consolidation and prepares for further upside.
EUR/GBP was the star performer in yesterday’s session, and while many pundits in the market here in London believe this price action was vindication of Cameron’s weekend veto, the reality of the situation remains that there were simply significant right hand side GBP flows associated with dividend payments. Technical levels in the EUR/GBP being breached clearly somewhat coloured this picture.
The day ahead holds little by way of important data, save for the following; UK CPI (which actually has the potential to surprise to the upside), the ZEW survey results for both Germany and Europe (it’s the same thing these days surely) and, of course, tonight we have the FOMC announcement. On the latter, I look for no change to the overall rhetoric and certainly no change to parameters of either rates or stimulus package. There is, however, the chance that the rate path as set out in previous meetings with a mid 2013 horizon will be extended (if not formally, then certainly in spirit) out to the end of 2013.
Levels for the major pairs remain in play as they were form the tail end of last week and the disappointment of a failed summit. The bias as noted above is for more USD purchases, however, and rallies in “risk” pairs serve as opportunities for traders to further fade strength.
In EURUSD the first port of call on a small squeeze this morning is the important 1.3250 pivot level, with stops assuredly sitting just above, while 1.3280/00 should prove to be a far more formidable mountain to ascend.
AUD/USD likewise will have initial difficulty above 1.0130/50, but if the EUR/USD decides to go for a headline driven run, then this pair too will have a look at 1.0200/30. Personally, I don’t rate its chances and the downside still remains the favoured directional play.
Cable becomes an enigma play today and best stood aside from. Various M&A and dividend flows seen over the last 5 or so trading days have meant that the pair has decoupled in the very short term from the rest of the market. But worth noting the incredible ability of the pair to hold the 1.5550 support level.
Keep an eye on EUR/AUD as this pair is in thin markets and, in the coming days especially, has the real potential of cleaning out significant stops sitting below historic lows at 1.3000 before roaring back with a vengeance. Many punters out there have used the quadruple bottom to get long over the last 2 weeks and no doubt many more will attempt to do so again now that we’re down here once more. An inability to exactly put my finger on why has my bones saying to me that we clean out lower before we resume the run higher.
Helmets on remains the overall strategy for forex traders. Just as they say only mad dogs and Englishmen go out in the midday sun - similar might be said about trading this Christmas market.