Mixed risk sentiment and Greenback flows
Tuesday 24 November 2020
A busy 24 hours has seen a roller coaster ride in both risk and USD sentiment with talk of some month-end flows shaping up ahead of the US Thansgiving holiday at the end of the week.
Some good two-way business to be had, albeit ever-fickle and once again a case of picking your entry/exit levels and not getting greedy. Go with the flow.Gold has suffered significant losses amid the firmer risk tones.
US corporate month-end USD demand/repatriation for tax needs cited as the cause of yesterday's Greenback rally with talk of more hitting the market over the next couple of days given the short week. Usual month-end equity hedge related USD flows expected to be negative according to initial forecasts/studies. Meanwhile conflicting signals also from the Trump adminstration where he is allowing the start of the transition ( was happening anyway from the GSA) while still claiming he is still contesting the election result.
GBPUSD initially based at 1.3350 yesterday after failing at 1.3380 before it traded higher again to test 1.3400 before a steady retreat to test the other end the range at 1.3280 amid that general USD demand only to bounce back to look at 1.3380 again this morning. EURGBP failed above 0.8900 and then retreated to test the strong support line at 0.8860-65 but subsequent rally failing at 0.8900. I remain a dip buyer overall but currently respecting the current range. GBPJPY duly found a base around 138.50 where I noted bids building yesterday and now testing 139.50 amid the firmer risk sentiment plays.
I stay poised to sell GBP rallies as my preferred side and buy back in the dips as ever.Patience continues to be a virtue and rally-selling in GBPUSD is still bringing some reward but entry level key as always. Definitely still expecting dip demand as I've warned for a while now. Brexit still a large elephant in the room.
USDJPY rallied strongly on that US corporate demand, bursting up through 103.80-00 to test 104.60 helped by firmer risk before running out of puff and now testing 104.20 support.
EURJPY held 123.20 and back up to test 123.80-00 as the two-way business continues. EURUSD held 1.1800 in yesterday's USD demand-led retreat from 1.1905 highs but now testing 1.1880 again as I type and caught up in the cross/variable USD flows still. USDCHF held around 0.9080 again but failed into 0.9150 on the USD rally and retreating again since as EURUSD finds dip demand with EURCHF steady but the SNB still ever watchful.
AUDUSD held 0.7280 again on the retreat and now testing 0.7360 having burst up through the strong 0.7340-50 resistance area from 0.7320 this morning amid some general USD selling. USDCAD failed above 1.3030 again and now testing 1.3020 again as I type amid the variable USD/risk tones.
Markets are ever-fickle so don't forget to contact me if there's areas 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: 08.26 GMT