EUR/USD has broken through the 1.38 level. Are we on for a move beyond the 1.40 level? It looks more and more probable. I guess the US tapping Merkel’s phone hasn’t done much good for the US dollar. Joking aside, the dollar has come under increasing pressure in recent trading sessions and I expect this to continue. With the consensus view regarding Fed stimulus that December tapering is looking less likely coupled with the improving economic picture in the Eurozone we’ll see investors look for alternatives to the US Dollar. The Dollar has lost 1% of its value this week. We’ve printed 1.3832 today so we should see the 1.3850 level broken in upcoming trade sessions. We had a slight retracement though this morning after the release of the German IFO data as it came under expectations. Next up on the data front today is the US docket with Durable Goods orders and the Reuters/Michigan Index.GBP/USD is continuing to ‘yo-yo’. We’ve been over 1.62 quite a few times however it is struggling to hold above there with dips back below. If you’re a buyer of USD I would suggest looking at covering off some of your exposure at these levels. The pound has been buoyed by the increase in GDP of 0.8% from the previous period. It’s the biggest increase since the second quarter of 2010. The figures released were in line with analysts’ expectations so we didn’t see a large spike. Sterling is up 0.3% against the Dollar this week. I’m still bullish on Sterling however I don’t see too much more upside. If you can lock in anywhere around 1.6150 and above I would deem that very attractive. Are you a seller of USD to GBP? I would stagger your sell orders at 1.6150/1.61 to take advantage of dips. Contact myself or one of the trading team to discuss implementing these orders.

GBP/EUR? We’re back below 1.18 as the EUR now seems to be the currency of choice for investors. Has the EUR lost its image of being near the precipice and consigned to history? It seems the mood is changing. Prospects are not exactly magnificent, however there does seem to be improvement. Investors are ploughing cash into Eurozone stocks at the fastest rate since 2002. With stocks deemed to be good value with low valuations compared with the rest of the world (outside of Emerging markets) more cash is flooding into the Eurozone through money managers. Will the EUR continue its recent push? I still believe the EUR is overvalued relative to Sterling. I think 1.20 is fair value on GBP/EUR however fair doesn’t really matter. If you have capacity to do so I would place market orders at the 1.1750/1.18 level as I think we’ll see a push back below 1.17 on GBP/EUR over the next week. If you haven’t worked market orders before we’re here to explain them to you so feel free to get in touch by phone or email to see how they work.

If you would like us to cover off any particular currencies please let me know and I’ll be happy to discuss.

Have a fantastic weekend

Kind regards,

Written by Liam Alexander