September 8, 2011 Forex Signals Report

After the ECB and the BoE release their monetary policy statements this morning, the markets will focus on President Obama’s jobs plan. This could put pressure on the U.S. Dollar against most major currencies. The markets have definitely calmed since the sell-off earlier in the week. Risk sentiment appears to be shifting to the bullish side which means increased demand for higher risk assets. Following the large sell-off, the EUR USD appears to have stabilized, setting up a possible bottom near the lower-end of its three month range. Rather than try to pick a bottom in the Euro it looks as if buying strength may be the best strategy.

GBP/USD got a boost following the German court ruling yesterday to approve the country’s involvement in the Eurozone bailouts. It rose to a high of 1.6040 having also been supported by improved risk sentiment. This came despite the release of weak data in the form of UK manufacturing and industrial production data. Industrial production was down 0.2% compared with June whilst manufacturing rose 0.1%. Equities rallied yesterday, recovering from the early week slump on speculation that US President Obama will propose a $300 billion plan to jump-start the economy and create more US jobs when he speaks at a joint session of Congress later tonight. GBP/USD has been unable to hold on to the 1.6000 mantel overnight however and it opens this morning at 1.5930 as investors grow nervous ahead of the Bank of England and European Central Bank monetary policy decisions today. No change is expected in the UK base rate and so the focus will be on whether the central bank raises quantitative easing above the current £200 billion level.

EUR/USD spiked yesterday morning following the German Constitutional Court decision to quash attempts by German euro sceptics to stop the country from participating in further Eurozone bailouts. However the court did state that parliament should have more say and input in to any future rescue attempts. The German government would need to seek approval of parliaments budget committee before granting any further aid to European countries. EUR/USD traded briefly above the 1.4100 figure on the news but slumped back soon after as investors agonised over the ECB monetary policy decision and Trichets accompanying statement due later today. Markets are pricing in a 30% chance of a rate cut. The announcement of any more QE is unlikely but there is still a potential for the ECB president to be dovish in his statement. EUR/USD fell to 1.4020 yesterday afternoon and it opens this morning at 1.4075. In the meantime GBP/EUR has fallen in the last 24 hours from 1.1400 to 1.1320.

Now, on to our open positions and new trades. Lets take a look at the specifics: