Month-end rebalancing likely to dominate FX markets

<p>The EU meeting and the next tranche of aid being granted to Greece seems to have created a classic buy the rumour sell the fact […]</p>

The EU meeting and the next tranche of aid being granted to Greece seems to have created a classic buy the rumour sell the fact scenario in FX risk space with the USD strengthening across the board bar the JPY with a technical failure of 1.3045 and a negative close pointing to a test of 1.2800 in coming days as the single currency remains in the 1.2800-1.3100 broader range.

The risk off sentiment has continued into the Asian session taking equities lower as fiscal cliff concerns return to investors minds not helped by comments from Senate majority leader Reid that he was disappointed with lack of progress and the time for ‘ happy talk ‘ was over and must give way to discussing specifics.

The price action doesn’t look constructive for the risk FX trade but as so often seen in 2012 this is just when the market is about to turn so I’m going to use 105.50 in EUR/JPY as a line in the sand in the short term with month end rebalancing flows likely to dominate today with the spot value being month end. Initial signs of these flows point to a USD buying bias.

Today’s data highlight will be the Fed’s Beige book report on the current economic conditions at 7pm this evening.



Supports 1.2905-1.2875-1.2800 | Resistance 1.2995-1.3025-1.3045


Supports 81.70-81.40-80.80 | Resistance 82.25-82.50-82.80


Supports 1.5980-1.5965-1.5910 | Resistance 1.6025-1.6055-1.6085


Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.