Interesting times ahead as another month gets underway
Monday 1 March 2021
Variable risk and USD tones as we begin another week and month with bond yields still in focus and grabbing the headlines again.
The RBA bought AUD 4bln long-dated government bonds following some similar action last week in an attempt to push yields lower towards target levels and now markets wait to see whether other CBs might follow suit. European yields falling as I type. Vaccine effect/economic recoveries also in play but traders and analysts now looking at how far the good news is factored in, especially for the Pound.
As always 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 found support just below 1.3900 where we had those large options rolling off on Friday and then ranged 25-85 for the most part amid some hawkish tones from BOE's Haldane and the 4pm London month-end demand. Failure to break back above 1.4000 though has seen a test of 1.3925 again. EURGBP failed at 0.8730 and then found further downside momentum after holding 0.8680 after the ECB came out with some dovish tones and catching out a market over-bought on Euros in the recent sessions. Holding 0.8630 for the moment but EUR sellers remain poised.GBPJPY dip demand at 148.00 after that decent retreat tested 147.50 has but failed at 149.30 on the rally amid variable risk and USD tones.
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. Patience and not getting greedy remain key.
USDJPY duly found dip demand at 106.20 amid some further JPY supply and USD demand and now back up through 106.50 to test 106.80 with large options interest in play. EURJPY capped at 129.40 after the ECB noises created that general EUR sell-off and now testing 128.40-50 bids as I type. EURUSD capped at 1.2140 but finding support at 1.2025 so far although rally sellers remain poised after those ECB comments. USDCHF failed into 0.9100 but holding 0.9050 to now test 0.9120 as EURUSD retreats. EURCHF is softer again but should remain underpinned for the moment with the SNB ever-watchful/helpful.
AUDUSD found support below 0.7700 and has found support since that RBA action with decent size option interest today nearby at 0.7750 also lending support. Feels heavy still though as we wait on the latest RBA decision tonight/tomorrow. No rate change expected but in light of recent bond action the rhetoric could be interesting.USDCAD staged a decent rally on Friday amid firmer USD/softer oil combo but capped at 1.2750 as we see a little retracement in sentiment.
The mighty Shrimpers of Southend stole a welcome point at home on Saturday in a 0-0 draw after being under the cosh for most of H2 but missed chances in first half showed our inherent weakness in front of goal. We go again tomorrow night and every point precious.
Let's continue to be careful out there in all things. Staying safe must be our main priority still. Have a good week.
Interbank rates: 08.42 GMT