Markets still unsure ahead of latest FOMC decision
Wednesday 27 January 2021
Today sees the latest US Federal Reserve FOMC monetary policy decision and presser and markets are still understandably variable to say the least. Some firmer risk tones have been evident but turning a little lower as I type and yesterday's USD initial demand proved shortlived.
No great expectations from the FOMC but as always we should be ready with entry and exit orders to feed off the algos if they pick up on any stimulus talk or conversely the equally ongoing topic of tapering.
Month-end USD flows are forecast to be negative and we saw some evidence of that yesterday from GBPUSD rallying strongly into the 4pm London fix. Today sees the month-end Spot date being traded so expect more action into that fix and some general USD supply.
As I keep highlighting we're still ranging overall with the various uncertainties continuing and the jury remains out so keep playing what's in front of you and don't over analyze.
GBPUSD broke back up through 1.3650-60 as the USD demand waned and then found a good base at 1.3680 before finally clearing 1.3725 to post highs of 1.3758 helped by that month-end USD supply and EURGBP faling to test the strong 0.8830 area. The hold of that area has added to the cap this morning but not expecting a collapse though with the ongoing USD supply and some option-led demand at 1.3700 today.EURGBP finally broke down through 0.8860 amid the GBPUSD demand but has held 0.8825-30 yet again but rally sellers will remain poised, for the moment at least and indeed some general EUR supply is helping a test of 0.8830 (1.1325) again after failing at 0.8850. GBPJPY foud a decent base at 141.50 then 142.00 then our old friend at 142.30 on the firmer risk/GBP tones but failing into 142.75 this morning.
I still have a naturally bearish stance on GBP overall and remain poised to sell into rallies but respecting dip demand still with price action ever fickle and that month-end demand also notable. Equally a case still for going long in the dips therefore as we continue to range. Patience and not getting greedy remain key.
USDJPY found a base at 103.55 this time but equally failing around 103.80 as we continue to range tightly amid the fickle risk and USD sentiment. EURJPY has failed into 126.20 and now falling back to 125.80 on dovish comments from ECB's Knott. EURUSD failed into 1.2180 and now testing 1.2120 as I type after those Knott comments.
USDCHF is holding at the old 0.8860 line again this time on the EURUSD retreat after duly failing into 0.8900 and with the SNB ever watchful.
AUDUSD held 0.7700 where we also had those large option contracts between 00-15 that I warned about yesterday to help underpin and now tested 0.7760. USDCAD capped at 1.2750 amid the softer USD/firmer oil tones and equally finding support at 1.2680 in the retreat.
As we look at trading opportunities to begin the year it's even more important not to over analyze but trade the price action with discipline and patience.
Another disappointing display last night from my beloved Southend United, losing 1-3 and currently losing their way again sadly after offering some hope in December.
Let's continue to be careful out there in all things though. Staying safe must be our main priority still.
Interbank rates: 08.31 GMT