Daily Reports FX Greece 29th September 2008

publication date: Sep 29, 2008

Week Has Started With Euro and Sterling Weakness…More to Come?


What a start of the week for euro and sterling, as the Sunday open saw both currencies deteriorating against the dollar. EUR/USD broke important support levels at 1.45 and 1.44 printing new weekly low at 1.4305 at the time of writing. The extended weakness is caused mainly on news that European Banks are in trouble, after Belgian-Dutch   Fortis Bank and British Bradford & Bingley were near bankruptcy and both were saved from joined efforts of government and other Banks.

Markets are incredibly agitated in the last days, what with US 700 billion rescue plan still not confirmed, bad economic data, banks and other investment houses reporting big losses and the whole financial system in turmoil. At times like these, investors usually buy safe haven currencies or gold and exit risky trades till things get better.
This week the economic calendar is full of important data, with ECB rate decision on Thursday and Nonfarm payrolls the releases that traders will monitor closely.

Today the economic calendar is almost empty, with some data out of US to be the only ones worth watching. We have the PCE data and Personal spending/income, which are expected slightly higher, but markets will probably ignore them for now as they have bigger issues to catch their attention. 

Traders will position themselves for the week and already the bets are on as to what Mr. Trichet and his pals will decide this Thursday. The fact that economic data continue to disappoint from the Euro area, combined with easing inflation,  gives fuel to analysts to say that maybe it’s time for ECB to stop with the hawkish stance and change its monetary policy from neutral to easing. Euro is weak on the back of these speculations and all eyes and ears will be on Trichet when he delivers his speech after the decision.

GBP/USD is also very weak these days and the trend so far seems to be on the downside, however 1.7920 seems to be a good support level and we think that the pair might find some short term support at least for now. Things in dear old England don’t seem to be better either and the latest victim of economic turmoil is Bradford & Bingley, one of the biggest mortgage  lenders in the country, which UK government decided to nationalize after the lender came near bankruptcy. This news kept the sterling under heavy pressure and traders now start speculating  that BOE will have to cut its interest rates sooner rather than later.

EUR/USD is trading lower since the European opening and if 1.43 gives way, 1.4280 would be a good support level and a place to go long with stops under 1.4230.
GBP/USD is under pressure too and next level to watch is 1.7960 ahead of 1.7920. Long positions could probably be taken at 1.7920 a very good support level with stops well under 1.7880.
So, all in all the name of the game in the markets across the globe seems to be fear and uncertainty for the future and that reflexes on the moves which are directionless and in the case of euro and sterling “choppy “ and violent. Let’s see how markets will react after the New York opening and what will happen with this “brilliant” US rescue plan which is expected to be voted sometime today…