IG Markets - Forex Focus September 15, 2010

IG Markets - Forex Focus

September 15, 2010

EUR/USD

Details
Prev close 1.2883 52 week high 1.5144
Last trade 1.2965 52 week low 1.1877
High 1.2967 Low 1.2830

Bloomberg Median Forecasts
Q1 2010 1.39 Q3 2010 1.25
Q2 2010 1.25 Q4 2010 1.26

Commentary

The euro has posted some hefty gains against the dollar just a couple of hours into the open of the US trading day. Early on, the data out of the euro area was not exactly pleasant. The German ZEW economic sentiment reading fell to a -4.3 indicating a very pessimistic institutional environment. This is the first time this reading has fallen below zero since March of 2009. This put some early pressure on the euro but with generally positive sentiment ruling the markets, the drop was not too bad. Positive retail sales data out of the US then helped turn a slightly risk averse environment into one of overwhelming risk appetite. From a technical perspective it was very important for the euro to break through the area around 1.2920 which acted as resistance on both August 18th and September 6th. The next challenge for the continental currency may come in near the big round number of 1.3000. If the hunger for risk continues through the week though and euro bulls can push through the run could continue toward 1.3055. 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 early part of the US trading day has also been very kind to those that have bullish positions in the pound. After finding technical support from a double bottom low near 1.5350, the GBP has gone on a near vertical run for over 160 pips. It seems that the better-than-expected Core Retail Sales figure of 0.6% growth in August has led currency traders to move out of the safe-haven trade and engage in the pound. While the run has been impressive so far, the UK currency may still struggle a bit as it approaches the September 8th high near 1.5533. While the data was better than expected today, there are a slew of reports still due out this week from both the UK and the US and traders will likely be cautious ahead of this stream of data. As has been the case so far through September, uncertainty over the global economic condition has kept this pair in a relatively tight range of only about 280 pips. After this long in the range though, if a break higher can be made, the momentum alone could easily carry this pair toward 1.5600. 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
This morning, the greenback has been losing ground rapidly to the loonie after every major report out of Canada was better than expected. Labor Productivity on a quarter-over-quarter basis fell by 0.8% in the second quarter of the year. Capacity Utilization increased to 76.0% in Canada and New Motor Vehicle sales were also better than expected at 2.4%. All of this positive data combined with the US information and even lingering effects from the strong industrial data out of China over the weekend, have been pushing the loonie higher. Similar to the other pairs, however, the recent run is approaching an area where it may be tough to continue further. The zone between 1.0215 and 1.0225 has acted as support before and in this case, also represents a 78.6% retracement of the US dollar climb from August 5th to August 31st. Nothing is guaranteed though, and if this support level fails to hold, an extended drop toward the August low could be in store for the USD. 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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