BOE in focus but Fed fallout still prevailing
Thursday 18 March 2021
Last night the US Federal Reserve kept interest rates on hold as expected but Powell & Co effectively threw away the overhyped Dot Map and warned that tapering is not going to happening anytime soon and disappointing the hawks.
Cue USD selling across the board and although we've seen demand return and BOJ-led renewed JPY supply as we test extremes of recent ranges there is still a softer Greenback tone generally this morning. Next up on the CB agenda is the BOE decision/vote count and Minutes at 12.00 GMT. No presser today. Given Bailey's remarks on Monday markets are expecting cautious optimism.
The FX jury remains out still so we need to focus on price action and value for money in our entry and exit levels. Discipline and patience needed more than ever in these ever fickle/fragile times.
GBPUSD has had another lively 24 hours and after testing 1.3860 yesterday after a vaccine hold-up fall just prior to the FOMC we've been back up to test 1.4000.Decent support now between 1.3930-50 as per my earlier tweet. EURGBP found support at 0.8560 before bouncing to 0.8606 post-Fed (GBPEUR down to 1.1620) as EURUSD gains oustripped GBPUSD but the move was soon faded in Asia trading and now testing 0.8550 again with GBP finding favour again and EUR wobbles returning.Large option contracts rolling off at 0.8600 today so we have that elephant in the room too potentially during the BOE aftermath but not in play right now at these levels.GBPJPY found a base at 151.40 this time and spiked to 152.20 on the BOJ news but failing at 152.50 with rally sellers on core pairs both poised still.
I remain poised to sell GBP into rallies as a jobbing preference but respecting dip demand still with price action ever fickle. Equally a case still for going long in the dips therefore as we continue to range at these lower levels. Patience, entry/exit level and not getting greedy remain key. Let's
USDJPY found support at 108.60 this time post-FOMC and spiked to 109.10 on news that the BOJ will widen its 10-year JGB yields target band from 0.2 to 0.25% but has capped around 109.30 again as rally sellers remain poised.EURJPY found support at 130.00 where we had previously capped but still struggling to hold gains above 130.50 as core pairs find rally sellers. EURUSD enjoyed a better day on positve EU vaccine news and rallied well post-FOMC to test 1.1990 but a step too far and we've seen EUR wobbles return across the board and this pair back down to 1.1935-40. USDCHF dropped to 0.9220 from 0.9270 post-FOMC but a decent line there with the SNB ever watchful and now back up through 0.9260.
AUDUSD found a decent base again at 0.7720-30 then 0.7760 and after wiping its feet at 0.7800 has gone all the way to test 0.7850 where we have large expiries today per my tweet yesterday. Running out of puff as USD demand returns and now 0.7805 again. USDCAD is finding support at 1.2360 amid the generally firmer USD tones and as oil trades off its highs again but has sellers at 1.2420 prevailing for the moment.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.45 GMT