The Safe heaven currencies – the US Dollar, Japanese Yen and Swiss franc, were among the best performing currencies last week as risk aversion dominated market sentiment. While Data in the US has been softening in recent months, economic data from emerging Asia has continued to be strong, second quarter GDP for most Asian regions beat expectations and other data has mostly been strong.

As Expected the Pound has continued its pullback against the safe heaven Dollar and the view taken is this has scope to continue as the Pound remains vulnerable to selling and the Dollar continues to strengthen on Global risk aversion. The current GBP/USD trades at 1.5340 – down almost 0.9% from the opening. Market resistance however will come into play with support around 1.5250 which should hold well and therefore US Dollar sellers should identify these levels particularly if you have a short / medium term requirement as the market currently offers one of the best prices selling for months. Buyers into the USD should look to work protective Stops as the Pound continues its bearish run against the Dollar.

The major commodity sensitive currencies – The Australian, Canadian and New Zealand Dollars all appear overvalued at present with technical indicators suggesting a corrective pullback with the Pound. If Risk appetite continues to falter and we see a potential sell-off on the equity markets then it is advised AUD / CAD / NZD sellers cover positions.

Looking at market activity today the Japanese yen traded strongly against the dollar, euro and sterling particularly during the London opening this morning as market sentiment remains generally shaky and sentiment remains mixed. Efforts by the Bank of Japan to stem the currency’s rise are being considered inadequate, with co-ordinated intervention the only thing that is likely to have any real market impact at this stage. With the market currently biased towards further yen strength, the dollar is edging back towards recent 15-year lows versus the JPY, with some speculation of moves even beyond this level. This may dictate further USD movement against other counterparts so JPY/USD movement will be key in the coming days.

Overall Risk aversion remains high and continues to dominate market activity – following this continued trend the Euro eased back versus the dollar over much of yesterday and overnight, showing little reaction to better than expected euro zone data. In yet another sign of risk aversion, the euro fell to new record lows versus the Swiss franc. Today however the Euro has performed well against the Pound with the GBP/EUR cross down over 1% from the opening today. Buyers into the Euro with short / medium term requirements should consider requirements as a retracement back to the relatively confined range of 1.1911 – 1.2015 is likely if liquidity continues to build up against Sterling.

If you have a requirement buying into any of the 16 most actively traded currencies and would like to discuss your requirement further or if you would like a live trading quotation do not hesitate to give me a call.

Tom Trevorrow

Senior Trader

01736 335264

tom.trevorrow@torfx.com

01736 335264

tom.trevorrow@torfx.com