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  • Writer's pictureMike Paterson

Better risk tones prevail after hawkish FOMC

Thursday 23 September 2021

Overall the FOMC pointed a little more firmly toward a November taper than expected, finishing by around mid-2022, while pointing to three median hikes in 2023 and with less dovish tones by Chairman Powell in the press conference, contrary to expectations including mine. He also notably highlighted that his 'own view on substantial further progress is all but met,' and noted that a shift could come 'as soon as next meeting.'

Equities and forex markets have seen good two-way business amid the fallout and I hope you took advantage of the info provided here and my subsequent tweets yesterday. Overall we're seeing some risk-on tones prevailing amid the greater clarity from the Fed and with concerns over Evergrande still subsiding for the moment but it's all relative and the potential danger/fallout has not gone away.

SNB has left everything unchanged includng the rhetoric as expected and next up today comes the latest BOE MPC decision and Summary/Minutes at 11.00 GMT. I'm not expecting much by way of decision but as always we must keep an eye on the voting where we might see more hawkish tones. Also expect them to refer to inflation and COVID fallout still. Cautionary/rock and hard place as ever. UK PMI flash data out at 08.30 GMT

So the feast/famine/variable-risk roller coaster ride continues and amid all this uncertainty I will repeat that patience and discipline in trading are key, as ever, and not being greedy. We've seen some extended moves again and hopefully you've taken advantage but don't beat yourself up if you've taken profit too early. It happens, and much better to be that side of the trade rather than having to take a loss. Equally if you've been the wrong side of these moves then I hope your stop-losses have been placed to minimize any damage.

GBPUSD: Another failure yesterday into 1.3700 post FOMC but also a hold around 1.3620 in a rapid algo-led knee-jerk reaction. I tweeted about the large 1.3700 sell interest as a reminder that we should ca there ahead of the BOE today and so it proved. I remain a rally seller while keeping an eye on EURGBP and GBPJPY as always.EURGBP: Failed at 0.8613 ahead of those 0.8620-25 sellers I highlighted here yesterday and the subsequent retreat into 0.8580 helping to underpin GBPUSD in the dips. GBPJPY: Good support now at 149.50 still holding the retreats amid the better risk tones and now testing 150.20 and helping to underpin core pairs but with sellers still poised when risk sentiment fades.

I remain a GBP rally seller across the pairs but being patient as ever. These are risk sentiment markets and ever fickle so good/tight position management essential.

EURUSD: 1.1755 providing a cap in the post-FOMC fallout and since holding 1.1680 in the retreat as the pair finds itself in the middle of cross-flow action and variable risk plays not to mention the large option interest at 1.1700 per my warnings here and tweets. USDJPY: A good rally yesterday from 109.50 amid the better risk and USD tones generally around FOMC and now testing 110.00 yet again. EURJPY: Now up through 128.60 amid the better risk tones and that 1.1700 option-led demand. Good sellers poised still 129.00. USDCHF: Still finding a base at 0.9220 as EURUSD caps and with the SNB ever vigiliant as EURCHF holds 1.0800 this time in the retreat from 1.0900. EURCHF: Holding 1.0800 now with SNB shadow ever present. Dip buying still the preferred trade but not greedy in the rallies and that's proved to be prudent again.

AUDUSD: 0.7280 broke post FOMC but 0.7300 duly capped the rally and we've been down to look at 0.7220 yet again. Large option interest today at 0.7240 and seemingly helping to support. USDCAD: Failure above 1.2800 and a break below 1.2740-50 support has triggered accelerated falls in the subsequent retreat on the fimer risk/oil tones and CADJPY buying. More option interest now in play today having fallen through 1.2700. Concidence? Probably not.

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

Interbank rates: 08.23 BST

GBPUSD 1.3646

EURUSD 1.1717

EURGBP 0.8586

GBPEUR 1.1646

GBPJPY 150.02

GBPCAD 1.7295

GBPZAR 20.0345

GBPHKD 10.6334

USDJPY 109.94

EURJPY 128.82

EURCHF 1.0827

EURHKD 9.1305

AUDUSD 0.7256

USDCAD 1.2707

USDCHF 0.9240

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