IG Markets - Forex Focus September 11, 2010

IG Markets - Forex Focus

September 11, 2010

GBP/USD

Details

Prev close 1.5429 52 week high 1.6878
Last trade 1.5393 52 week low 1.4231
High 1.5467 Low 1.5365

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

Commentary

This morning traders were greeted with some pretty strong swings in this pair, with sterling mounting an impressive rally around the opening of the UK markets only to give it all back after some negative economic data. The Producer Price Index for August showed a surprise contraction of 0.5%, slightly better than the previous reading for July of -1.0% but well below the expected increase. It will be interesting to see if economists now revise their expectations for next week's CPI figures, and if so how much of this gets priced into the currency equation. So far September has been a fairly quiet month, with the total range on this pair since 1 September at only about 235 pips. As we head into the weekend caution is still warranted considering the weekend data release by China. Barring any major moves, it looks like the GBP/USD will wrap up the week at about the dead center of the September range. Dan Cook, Chicago

EUR/USD

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

Commentary
EUR/USD looks poised to end the week stuck in the same narrow range put in over the last few days. At this point there is really no momentum to either side of the trade and with uncertainty still being the only thing that is certain, traders have been reluctant to push too hard on long or short positions. For the week the euro is down about 200 pips to the dollar, but most of those losses occurred in the first two days of trading and since then this pair has simply pivoted around the 1.2700 level. As market participation thins heading into the weekend break, it is probably well advised for traders to remain exceptionally cautious. After the markets close there will be a slew of data released in China that could have a massive impact on the value of this pair and it would not be a surprise to see a large gap, either up or down, when the market reopens after the weekend break. For those that are still looking to participate, it looks as if they are tending to shift toward currency options in order to fix their risk ahead of time, just in case the market makes a nasty turn against them. 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 USD/CAD pair has been virtually motionless over the last 24 hours. There was a slight burst of activity following the release of better-than-expected employment data out of Canada, but even that move was short-lived. Statistics Canada earlier today reported that their economy had added almost 36,000 jobs in August, even while the unemployment rate ticked up to 8.1%. In almost every indicator we have seen over the last few months, the Canadian economy looks vastly stronger than that of the US. With the close trading relationship between the two countries, however, even great economic data has not been able to create an environment that is overwhelmingly CAD-positive. As the US continues to struggle with a recovery that could at best be classified as anemic, it may be tough for their neighbours to the north to get by unscathed. For the time being the support zone between 1.0275 and 1.0300 looks like it is holding. Heading into next week though, with Chinese data due out over the weekend, it may not be the best time to rely too heavily on technical levels until we see what the open next week brings. 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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