Consolidation time as US leaves rates on hold citing economic “pause”

Mike Paterson’s Daily Forex Brief

Last night the US Fed left interest rates on hold but the accompanying statement from the FOMC left little for traders to trade off.

The essence of it was that the Fed are likely to stay in easing mode for a good while yet and this should continue to be generally bearish for the greenback.

Given the lack of any real impetus last night it was interesting to see EURUSD first spike only a little higher to new highs on this rally of 1.3587 but then fall back slowly in late NY and Asia. This suggests the market was a little over-bough of Euros and we’ve seen a dip to 1.3543 where, surprise more/fresh buyers have appeared to put a floor under the pair for the moment.

EURGBP also had another spike prior to the Fed news and we saw 14 month highs of 0.8607 (GBPEUR down to 1.1618) but similarly to EURUSD we’ve seen a retracement with lows so far of 0.8558 (1.1685). Whether the natural month-end buying is now done will be revealed today but expect bids in the dips to 0.8525 in any case. Resistance remains at 0.8610.

The move lower has been helped by a few month-end buyers of GBPUSD which has also triggered some profit-taking to climb back above 1.5800 after lows yesterday of 1.5725. Sellers are expected between 1.5840-50 and again around 1.5895.

Overall the Pound has fared a little better overnight with losses essentially only against the strengthening Swissy as EURCHF falls back to 1.2337.

So today we can expect some decent two-way business at month-end but there’s little to suggest any change in recent trends.

Last night saw the 2013 BBC 2 Folk Awards and I was thrilled by the nomination in two categories of a brilliant young musician called Luke Jackson who I have worked with on a number of occasions with my music promotion hat on.

He missed on out both awards last night but at 18 years old his time will surely come, sooner rather than later. Check out http://www.lukepauljackson.com and be amazed.

Interbank Rates at 08:42 BST

Today’s Data: BST

13.00-EU – German CPI

13.30-US – PCE Price Index / Personal Income/Spending / Weekly Jobless Claims / Employment Cost Index

14.45-US – Chicago PMI

Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.

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 mike.paterson@economicvoice.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.