Wednesday, January 26, 2011

Sterling experiences boost further to BoE minutes as Euro continues to hit 2 month highs

!! EUR/USD !!
Today's European session sees the Euro continue its recent run of 2
month highs as it yet again reaches a high of 1.3720 in mid-session.
The rise has been attributed to the perception that interest rates
will rise in the Euro zone prior to the US, in an effort to battle
inflation, further to recent tough talk by European Central Bank
President Jean Claude Trichet. The Euro began the session on a
decline, dropping some 35 pips to reach a day's low of 1.3656 but
quickly recouped those losses and bounced back up some 60 pips as it
moved towards its 61.8% Fibonacci retracement level, at 1.3743, of its
November 4th to January 10th decline. This level is seen as a strong
resistance level which if broken may see the Euro test the November
22nd high of 1.3785. The market is now focused on the upcoming Federal
Interest Rate decision which is expected at 19:15 GMT to come out the
same as its previous value of 0.25%.

!! GBP/USD !!
The Sterling experienced a boost today further to the release of the
minutes from the Bank of England's policy meeting this month which
showed that policymakers considered an interest rate hike and that the
decision of not increasing the rate was closer than previously
anticipated. The British pound gained a momentary burst against the
Dollar of some 40+ pips around 09:30 GMT to 1.5870, following the
minute's release before returning back to levels seen prior to the
release but went on from there to steadily rise and reach a daily high
of 1.5890 and trade for the remainder of the session around the 1.5862
levels. Further to the release of the minutes the odds for an interest
rate hike of 25 basis points occurring in May have once again
increased form a low of 30% - subsequent to the UK GDP announcement of
-0.5% - to 46%.

!! EUR/GBP !!
In early session the Euro began with an inclining motion against the
Sterling reaching a two and a half month high of 0.8671, but
subsequent to the release of the Bank of England minutes the cross
pair dropped by some 40 pips to a low of 0.8620 and has traded
throughout mid-session around the 0.8632 levels. The movement seen was
an inverse reflection of what was seen with the GBPUSD pair, with the
EURGBP dropping momentarily upon the announcement of the minutes
before sustaining levels prior to the announcement and then going on
to relive such low levels within the next hour. The announcement sees
the Sterling turning back towards its 50% Fibonacci retracement level,
at 0.8610, of its October 25th to January 10th drop – a level that
the pair crossed over yesterday following the lower than expected UK
GDP data.

!! USD/CHF !!
The Swiss Franc opened today's European session paring back on
yesterday's gains which saw the USDCHF pair drop some 80+ pips to a
three week low of 0.9402 on the back of worries with regards to the
economy and surprising UK GDP figure. Early session saw the Swissy
paring back some 30 pips to trade around the 0.9452 levels before
experiencing some volatility which saw the Swiss Franc trade around
the 0.9443 level with an oscillatory range of +/- 20 pips.

!! USD/JPY !!
The Japanese Yen moved against recent trend in today's European
session as it dropped some 12 pips against the Dollar to see the
USDJPY pair rise to 82.23 in mid European session. In recent days the
USDJPY pair has been steadily dropping after having reached a peak of
83.07 at the end of last week. Throughout all of today's sessions
the movement within the USDJPY pair appears limited with a range
between the peaks and troughs of not much more than 25 pips.
Source: Fxstreet.com

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