All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

Euro Correction Continues - Top in Place?

Last updated 9/29/2009 6:13 AM ET (GMT -5) 0 Comments - Add your comment

• Share this:

Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• EZ Consumer Confidence at 11 month high
• UK Current Account gap widens significantly, but CBI Distributive Trades +3 vs. -16 eyed causing sharp short covering rally
• Asian rebounds but Europe soft at start of trade in equities
• Oil quite at $66/bbl
• Gold at $994/oz

Overnight Eco

• NZD Building Consents 1.7% vs. 4.5% last
• JPY Tokyo Core CPI -2.1% vs. -2.0%
• JPY National Core CPI -2.4% vs. -2.3%
• CHF UBS Consumption Indicator .66 vs,.75 last
• EUR German Import Prices 1.3% vs. 0.7% eyed
• GBP Current Account -11.4B vs. -7.7B eyed
• GBP Final GDP -0.6% as expected
• GBP Net Lending to Individuals 0.7B vs. 0.3B eyed
• GBP Mortgage Approvals 52K vs. 51K consensus
• EUR Consumer Confidence -19 vs .-21

Event Risk on Tap

• USD S&P/CS Composite-20 HPI expected at -14.3%
• USD CB Consumer Confidence expected at 57.1

Price Action

• USD/JPY rebounds to 90.00 on backtracking by Fujii but can't hold on
• AUD/USD better budget data helps lift the unit to 8750 before it sells off
• GBP/USD drops below 1.5900 once again in weak CA data
• EUR/USD drops through 1.4600 as profit taking kicks in

The correction in risk FX continued for the second  day in a row as jawboning from various G-3 officials, softer equity prices and a bout of profit taking all combined to push the euro, the pound and the yen lower against the dollar in mid morning European trade. Japanese officials were  forced to backtrack on their comments from yesterday with Finance Minister stating, “If the currency market moves abnormally, we may take necessary steps in the national interest.” He was followed by chorus of Japanese officials including Deputy Prime Minister Kan who urged greater stability in FX fluctuation, and special Currency Advisor Gyohten who stated that Japan should continue support of USD as key reserve currency.  Meanwhile ECB member Nowatny echoed Jean Claude Trichet’s comments regarding  the need for a strong dollar.

As we noted earlier, the verbal intervention from both European and Japanese officials  is a clear sign of concern that the anti-dollar rally has moved too far, too fast.  Yet, whether this week’s action marks an intermediate term top in the high beta pairs remains to be seen.  Verbal intervention can certainly slow down the price action but it cannot reverse it.  The greenback may continue to strengthen for the rest of this week on safe haven flows and natural profit taking, but a true turn around in the dollar is unlikely to occur until and unless the market becomes convinced that US short term rates will begin to rise.

On the eco front the EZ data continued to show steady improvement with Retail PMI numbers  climbing to 48.6 from 47.1 the month prior while Consumer confidence reached an 11 month peak printing at -19 vs. -21 forecast. The news bodes well for the German Retail numbers later on in the week, suggesting that consumer demand may be finally starting to expand in the 16 member region.

In UK, the news was decidedly more mixed with Q2 GDP data essentially printing in line at -0.6% but the Current Account deficit ballooning to -11.4B versus projections of -7.7B. This was the worst reading since Q3 of 2007 and weighed on the pound which dropped below the 1.5900 figure once again.  Sterling was also battered by reports that the BoE was having a meeting with City economists to explain its QE program  with traders concerned that this event was precursor to further expansion of non-conventional monetary policy initiatives. The unit however, bounced very strongly on September CBI Distributive trades report that showed a massive improvement to +3 from -16 eyed as UK Retail Sales rebounded sparking hope that the sector is finally stabilizing.

In North America today, the only report of note is the consumer confidence reading expected to print at 57.0 vs.  54.1 the month prior. A  better than expected result should help equities and help risk FX recover some of the early European losses but currencies are likely to remain in a broad consolidation for rest of this week ahead of the NFP numbers on Friday. With G-3  fiscal and monetary authorities acting as guard dogs any rally in high beta FX should be muted for the time being.     

FX Upcoming

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.