Month-end US Dollar sales notable again
Friday 28 August 2020
Yesterday's eagerly awaited Powell statement/Q&A gave traders some great two-way business as per my tweets.Powell offically confirmed what markets had mostly been expecting re shifting to average inflation targeting but since then it's those month-end USD-negative flows that I warned about earlier in the week that have dominated the FX landscape adding to the perceived more-dovish Fed.
Risk sentiment has been variable and Japan's PM Abe has just confirmed press reports that he will resign due to ill health, news that has sent a few shock waves through JPY pairs and Japanese equities. Trump duly accepted the Republican Party nonmination with another dig at China and risk has remained wobbly since. Today BOE Governor Biley makes a speech in the virtual Jackson Hole symposium at 13.05 GMT.
A reminder that the UK is on holiday on Monday which is also month-end so we can expect to see some thinner liquidity but USD-neg flows continue overall. I will be taking my first day off writing my updates since COVID lockdown and will enjoy the long week-end away from my desk. Normal service to be resumed on Tuesday.
GBPUSD capped at 1.3230 pre-Powell but held the latest support line at 1.3160 pre and post Powell from 1.3285 and now posting 1.3290 on those month-end USD sales.EURGBP again tested support into 0.8935 but has since bounced back to 0.8965 helped by the usual month-end demand that I've been highlighting.GBPJPY found a new base at the 139.80 then 140.20 and 140.60 amid the better risk tones with core pairs both rallying strongly before the Abe news created a dent in sentiment and we're back down testing 140.60 from highs of 141.55.
I stay poised to sell GBP rallies overall as my preferred side and buy back in the dips as ever.Patience will continue to be a virtue and entry level key as always. I still expect to continue seeing dip demand though, particularly GBPUSD on month-end flows, as we continue to range.
USDJPY found support at 105.60 before rallying strongly on the USD rebound post-Powell and testing 106.80 before the sharp retreat back into 106.00 on the Abe news. EURJPY enjoyed the core pair dip demand to post highs of 126.75 but since down now to test 126.00 post-Abe news. EURUSD has enjoyed its own roller coaster ride and finally broke up through 1.1850 and now 1.1900 on those month-end USD sales. USDCHF failed at 0.9120 again as EURUSD based with EURCHF once again the anchor and now down testing 0.9030 bids as EURUSD continues its rally.
AUDUSD based this time at 0.7220 and now finding a fresh base at 0.7260-80 and making a move through 0.7300 amid the USD-supply. USDCAD capped at 1.3160 on the general USD selling but found support at 1.3100 initially before now posting 1.3070 in European trading as USD supply returns.
Markets are ever-fickle so don't forget to contact me if there's areas of these markets 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. Have a great week-end.
Interbank rates: 08.43 BST