FX Major Pairs Show Breakout Potential

After a promising start, FX markets were showing some potential for a breakout in some of the major pairings, with GBP pushing against the bearish calls of late to carve out a modest high at 1.3030 vs the USD, and through to .8585/90 against the EUR.

The latter was assisted by a EUR/USD dip under 1.1200, but after dropping 20 ticks below the figure, we were back above this level amid reports of potential state aid for the ailing Deutsche Bank AG NA O.N. (DE:DBKGn) bank. This was later denied by the German Finance Ministry. In the UK, BoE member Shafik reiterated the potential to ease again if the data warranted, but the hit on GBP was brief, with strong demand in evidence.

On the US date front, durable goods came in flat on the month (Aug), which was better than expected, but drew little response from the markets ahead of Yellen’s testimony on banking regulations. Little of relevance for the USD as yet, though more (Yellen) due tomorrow.

The DoE report later in the day showed a small build, but oil and related FX pairs are still waiting on the oil producers meeting before committing on fresh direction, with front month WTI tight on $45.0 while USD/CAD has found some support circa 1.3200 before a USD push higher into the London close saw 1.3250 tested again.

Month end flow will see plenty of volatile trade over coming sessions, with Wednesday’s flow directionless overall. USD/JPY is still camped in the mid 100.00’s, and has been shying away from the spotlight for now. AUD/USD continues to eye .7700, but sellers coming in a little earlier now – yesterday’s .7695 high intact. NZD remains on the back foot; camped in the mid .7200’s in spot and tentatively holding the upper 1.0500’s vs AUD.

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