IG Markets - Forex Focus September 14, 2010

IG Markets - Forex Focus

September 14, 2010

EUR/USD

Details
Prev close 1.2679 52 week high 1.5144
Last trade 1.2872 52 week low 1.1877
High 1.2876 Low 1.2673

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

Commentary

The euro has started out the week strong against the dollar as global risk appetite abounds. Over the weekend, strong economic reports out of China illustrated that even in the face of tightening measures taken this year by the government the economy is still growing rapidly. This gave industrial commodity traders a fairly solid bullish stance heading into the market open. The positive sentiment was certainly expanded as well when the Basel Committee revealed its list of banking requirements yesterday. These requirements are not as stringent as many investors had previously feared and with an eight-year time frame on the implementation of new capital requirements, banks should have plenty of time to adjust. From the outset, it does not appear that any of the requirements put on the banks would further dampen growth efforts in many of the countries still struggling to find their way out of the recent recession. As positive attitudes toward future economic growth rise, so does the risk positive euro. Since hitting a September low near 1.2640 the pair has gained over 200 pips and continues to strive toward recapturing its September 6th high near 1.2920. Dan Cook, Chicago

GBP/USD

Bloomberg Median Forecasts
Q1 2010 1.60 Q3 2010 1.52
Q2 2010 1.47 Q4 2010 1.53

Commentary

The same drivers pushing the euro higher have also helped sterling climb against the dollar to start the week. Unlike the euro though, the GBP was unable to hold onto earlier gains and has come off the top a bit heading into the US trading day. It is widely viewed that the Basel Committee's time frame concessions have definitely been more friendly to the European banks, particularly those in Germany, than they are to the US and UK banks which pushed for a shorter implementation time frame. It is important to note though, that none of the recommendations are written in stone as of yet. If the recommendations are fully implemented but a shorter time frame is required by policy makers, the same reasons the euro is climbing today, could in turn become friendly toward the pound and dollar. So far for the month of September, the area around 1.5400 seems to be acting like a price magnet. For the time being, and barring any earth shaking announcements, it seems that investors are quite content to let this pair trade in the 230 pip range between about 1.5300 and 1.5530. Dan Cook, Chicago

USD/CAD

Bloomberg Median Forecasts

Q1 2010 1.05 Q3 2010 1.04
Q2 2010 1.01 Q4 2010 1.05

Commentary

The loonie is also up against the greenback, albeit only marginally, as the trading week gets underway. The positive news out of China over the weekend has helped the industrial commodities, particularly oil, post some solid gains and this in turn has pushed the CAD higher. Interestingly though, the correlation does not seem to be as tight as one would expect. As the USD/CAD fell into the support zone between 1.0270 and 1.0300 earlier, oil continued to climb, but the CAD took a pause. I would expect though that if the downward pressure continues on this zone for much longer, we could finally see it break and a run toward 1.0225 could happen quickly. Traders are likely to remain somewhat cautious though ahead of several major announcements out of both the US and Canada this week and while it is a risk positive environment so far today, that feeling can change on a dime. 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.


Disclaimer: IG Markets provides an execution-only service. The material above does not contain (and should not be construed as containing) investment advice or an investment recommendation, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Markets accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of the above information. Consequently any person acting on it does so entirely at his or her own risk. The research does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. This communication must not be reproduced or further distributed.

ENDS

Discover more about FX trading with IG Markets

© Scoop Media