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  • Writer's pictureMike Paterson

Pound falls as BOE disappoints the hawks

Friday 5th November 2021

It was the turn of the BOE to let us know what they want to do in these inflation days and I warned here yesterday that "...risk should be to the downside as we can expect the usual cautious tones on inflation and post-COVID economic recovery." Well, Bailey & Co kept duly interest rates on hold and its rhetoric disappointed the hawks and bulls although they haven't ruled out hikes in the future if inflation persists.

Cue falls in the Pound across the board as traders bailed out, triggering further stop-losses along the way to post 1-month lows in many pairs this morning as the selling resumes after a pause. I hope my ongoing steer has helped. Have we now gone far enough? I'm not so sure but obviously we must judge these moves in context with what's going on generally elsewhere in the UK and indeed globally with other CBs.

Today, apart from the extent of any further GBP fall-out, market attention turns to the latest US NFP data amid all the usual rubbish hype. As ever let the algos do the heavy work and then decide what presents value or not. Placing orders into these events prior can often be of benefit to catch the first wave of algo reaction but It's important to identify on-going ranges and trade the momentum if broken but not getting greedy if they stay intact. All things/moves must be considered in context. Forex is not rocket science but it is ever-fickle so you have to stay in control of you/your trades as much as you can.

GBPUSD: Capped at 1.3650 prior to the BOE then fairly much straight decline to 1.3470 albeit wiping its feet at a few support points. Pips banked in the retreat along the way and now some re-sells around 1.3500 as we seem to be capping there for the moment. Fresh lows of 1.3463 as I type and some more pips banked while staying short still. Rinse n repeat with one eye on the BOE. I remain a rally seller overall as we continue to range while keeping track of EURGBP and GBPJPY as always. EURGBP: A good hold of 0.8450-60 and post BOE able to take out the 0.8520-25 offers making the option interest redundant by the time of expiry (or maybe exacerbating the move higher) and now posting 0.8590 as I type (GBPEUR down to 1.1640). Large option contract interest again today in play potentially should we dip from here. GBPJPY: Support at 155.00 and 154.00 broken in the fallout and now 153.00 being tested as I type as the softer risk tones add to the general GBP supply.

I remain a GBP rally seller across the pairs overall as my preferred trading side albeit against the grain currently so being patient as ever. These markets are ever-fickle so good/tight position management essential.

EURUSD: 1.1545-50 still providing pivotal price action as we remain tightly bound still while the pair remains in the middle of cross-flow action, variable USD with more option interest nearby today. USDJPY: Support at 113.60-70 this morning where we also have large option interest today. EURJPY: An old support line at 131.00 now holding but failing to get back over the 131.60 area I highlighted yesterday with rally sellers ever poised.

USDCHF: 0.9120 now holding with the SNB ever vigilant but failing to get back above 0.9150 as sellers remain poised as EURCHF struggles to recover amid softer risk and general CHF demand. EURCHF: 1.0530 still holding the retreat but failing above 1.0560 amid notable CHF demand still but with the SNB ever vigilant. Sellers in the rallies poised still.

AUDUSD: That old 0.7420 support line history and testing good interest now at 0.7370-75 as the retreat continues amid the AUDJPY and some AUDCHF supply and pips gratefully banked again. USDCAD: Still underpinned at 1.2380-00 and now further support at 1.2430-50 amid the CADJPY supply still as oil caps again.Sellers poised at 1.2480-00 now where we have large option interest on top.

Have a great week-end everyone. Let's continue to be careful out there in all things. Staying safe must be our main priority still.

Interbank rates: 08.17 GMT

GBPUSD 1.3470

EURUSD 1.1557

EURGBP 0.8577

GBPEUR 1.1659

GBPJPY 153.27

GBPZAR 20.5250

GBPCAD 1.6760

GBPHKD 10.4932

USDJPY 113.76

EURJPY 131.46

EURCHF 1.0555

EURHKD 9.0070

AUDUSD 0.7389

USDCAD 1.2457

USDCHF 0.9134

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