IG Markets - Forex Focus September 2, 2010

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]" target="_blank">IG Markets - Forex Focus

September 2, 2010

EUR/USD

Details
Prev close 1.2680 52 week high 1.5144
Last trade 1.2805 52 week low 1.1877
High 1.2856 Low 1.2663

Bloomberg Median Forecasts
Q1 2010 1.39 Q3 2010 1.25
Q2 2010 1.25 Q4 2010 1.25

Commentary
The euro exploded higher overnight gaining almost 240 pips from yesterday’s low. There was nothing really that positive on the economic front in Europe; if anything, it was mostly negative with German Retail Sales contracting in July by 0.3%. The real economic driver around the globe today was a better than expected Manufacturing PMI reading out of China. While the reading of 51.7 was certainly not too far over expectations, the 0.5 point increase on the previous month indicated that growth remains strong for the consumption giant, thus creating an environment of risk appetite which tends to fuel the euro. The dollar has been able to pare back some of the losses after a much improved Manufacturing PMI reading of 56.3. Even with the recent gains though, the dollar remains well off of yesterday’s high point. There are still a lot of major economic announcements coming out this week, including a rate statement and press conference from the European Central Bank (ECB) tomorrow. While the rate will likely stay at 1.00%, the press conference held by Jean-Claude Trichet, President of the ECB, always has the ability to kick up volatility in the market—particularly during the unscripted question and answer portion. Dan Cook, Chicago

GBP/USD

Details
Prev close 1.5348 52 week high 1.6878
Last trade 1.5445 52 week low 1.4231
High 1.5492 Low 1.5337

Bloomberg Median Forecasts
Q1 2010 1.60 Q3 2010 1.52
Q2 2010 1.47 Q4 2010 1.50

Commentary
The pound also shrugged off some fairly negative economic data this morning to rally up to almost the 1.5500 mark. There was some selling pressure on sterling after the UK Manufacturing PMI missed expectations and fell to a reading of 54.3 in August. Even with this negative reading though, the overall global market sentiment seemed to be bursting with an appetite for risk and it wasn’t until a better than expected Manufacturing PMI reading out of the U.S. that the dollar could gain back some of the earlier losses. Technically speaking, it was pretty important for the GBP to hold yesterday’s lows and after tracking sideways near those levels for almost 10 hours, any bearish attitude finally exhausted. For today, the resistance remains near the zone of 1.5475 to 1.5500 with a potential upside toward 1.5580 on a break of that zone. Support still looks strongest near yesterday’s lows around 1.5330 with 1.5240 being the next level on a break lower. Similar to the euro, there are a lot of economic events yet to come this week including key housing data set to be released near the opening of the UK trading session tomorrow. Dan Cook, Chicago

USD/CAD

Details
Prev close 1.0656 52 week high 1.1103
Last trade 1.0502 52 week low 0.9931
High 1.0657 Low 1.0484

Bloomberg Median Forecasts
Q1 2010 1.05 Q3 2010 1.04
Q2 2010 1.01 Q4 2010 1.05

Commentary
The CAD has also been putting up large gains against its US counterpart, today. Risk appetite, particularly for the industrial commodities, shot up after the positive manufacturing data out of China and a very positive quarter-over-quarter GDP figure out of Australia. Considering the giant consumer of materials that is China, it is easy to see how a report which confirms that growth is still robust could spur commodities prices higher. Copper, Platinum and, probably the most important commodity to the loonie, Crude Oil have all been soaring today. Confirming this sentiment and creating a win-win scenario for the CAD was a better than expected US Manufacturing PMI reading out of the United States. With both China and Canada’s largest trading partner the US providing economic indicators that seem to imply demand could strengthen for oil, the CAD roared higher. On the technical side, we are currently at a pretty interesting level. Once again yesterday the level near 1.0670 held firm and the resulting reaction, confirmed by the fundamentals has taken the USD/CAD pair down to a key zone of support between 1.0475 and 1.0500. This was the zone that was mentioned yesterday, and so far, over the last few hours it has held firm. If this level can hold any assault by the CAD bulls, the resulting bounce could favor a move back toward 1.0600. If risk appetite remains high, however, and this support zone fails the next area of support may not exist until the area between 1.0385 and 1.0410. Dan Cook, Chicago

Notes: Bloomberg Median Forecasts are produced by Bloomberg by taking the median level from rates forecast by a number of contributors. These contributors consist of leading banks and security firms.

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