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  • Mike Paterson

A new month and US Dollar jury still out.

Monday 3 August 2020

Month-end flows were mixed in the end to say the least but nonetheless a volatile day on Friday has produced a firmer tone for the Greenback but it's still all very fickle out there.


I hope my steers on Twitter helped on Friday but some of the moves surprised me too even if I had raised the point at the outset here of how much the generally expected-negative USD month-end tones had already been factored in. Turns out it had in many cases but that didn't stop some interesting moves in cross-related flows.


Firmer risk sentiment atm as European trading gets underway but USDJPY has retreated to 105.85 from highs of 106.44 after a further rally on the announcement of Seven & I's all-cash acquisition of Speedway for USD 21bn which may have contributed to pushing the rate higher. Reports of Friday's big rally from 104.20 being some BOJ intervention but I'm not convinced. Either way the pair's recovery, and Yen supply generally, was notable and now we wait to see how FX market plays out as a new month gets underway.


GBPUSD duly continued its rally helped by some GBPJPY demand/stops and EURGBP supply and posted 1.3170 before retreating into the 4pm London month-end fix as EURUSD found expected demand pushing EURGBP higher but with the pair finding rally sellers poised at 1.1850 helping to cap Cable too. We've now been down to 1.3055 but holding the atm.EURGBP broke down through 0.9000 on Friday with the GBP demand pushing it lower and much of the month-end demand seemingly already filled then that spike back around 0.9020 around the London fix before settling into a tight 0.8985-0.9020 range since with core pairs moving in tandem and large option expiries today at 0.9000. GBPJPY found support at those 136.20 bids this time around but failing 137.40 for the moment although still underpinned.


I stay poised to sell GBP rallies overall as my preferred side and buy back in the dips as ever.Patience will continue to be a virtue and entry level key as always. I still expect to continue seeing dip demand though to fill a few holes should we start retreating further.


USDJPY found a base at those 104.19 lows and rallied steadily all day to test 106.00 on Friday triggering stops along the way in a variety of JPY pairs that duly added to the upward momentum and I was grateful I had banked my short pips already as per my Friday update but it seems to be retreating again now so perhaps normal recent service eventually being resumed. EURJPY found support at 124.00 but capped at 125.20 but still underpinned ito 124.40 on the generally better risk sentiment.EURUSD duly capped at 1.1900 amid some general Euro supply that I noted here on Friday but underpinned now into 1.1740 with the general Greenback selling resuming this morning. USDCHF held at those 0.9060 bids and with EURUSD in general retreat we saw a test of 0.9150 on Friday and now 0.9180 this morning with EURCHF still underpinned and the SNB ever vigilant in the dip.


AUDUSD continued its retreat from 0.7200 and testing 0.7100 as the Victoria COVID lockdown seemingly does little stop the resurgence. Latest RBA decision in the next 24 hours in the frame too and they're not likely to be that bullish.USDCAD duly held 1.3400 with the help of the large option expiry interest on Friday only to drop sharply from 1.3430 to 1.3380 into the 4pm London fix amid and we're capped at 1.3430 since.


Markets are ever-fickle so don't forget to contact me if there's areas of trading these markets that you might need some further help with.


Let's continue to be careful out there in all things. Staying safe must be our main priority still.


Interbank rates:  08.40 BST

GBPUSD   1.3068

EURUSD   1.1764

EURGBP   0.8995

GBPEUR   1.1116

GBPAUD   1.8379

GBPCAD   1.7532

GBPJPY   138.43

GBPZAR   22.6020

GBPHKD   10.1409

USDJPY   105.94

USDZAR   17.2778

EURJPY   124.55

EURCHF   1.0795

EURHKD   9.1228

AUDUSD   0.7107

USDCAD   1.3419

USDCHF   0.9179


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