We did say that positions were too polarized to expect anything meaningful out of last weekend but didn’t expect absolutely nothing to result. And we didn’t expect the polarization to grow even more acute during the week.
With Eurogroup chairman Jean-Claude Juncker leaping into the fray decrying Euro strength while taking a side-swipe at Greece, with Japan’s finance minister Noda criticising both South Korea and China (and both those countries biting back), currency skirmishes, if not currency war were in full swing.
Yet amid the resistance to currency strength there were tentative moves towards liberalization with both Russia and Singapore freeing up their currency bands.
These are interesting times to say the least and technicals are not of much use with major pairs just through major levels (an exception to that is AUD/USD of course which currently has seen a top of 0.9994, and yes it is only a coincidence that 99.94 was Bradman’s test average.)
Getting this market right is about getting the politics right. Morgan Stanley encapsulates the problem in this morning’s ‘FX Pulse’: “We are still trying to determine to what degree – and in which countries – central banks will be more prone to respond with intervention-sparked increases in domestic money supply or by letting their exchange rates appreciate.”