Pound making the most of the Greenback's retreat
Friday 31 July 2020
If markets took their time to digest the FOMC announcement then FX pairs, and the Pound in particular, have pressed the sell-USD pedal all the way to the floor since and the Greenback is reeling.
Month-end flows are USD-negative across all G10 currencies as I warned earlier in the week and we've definitely been seeing that play out. Now the big question is, apart from the usual London 4pm fix flows, how much of what's been sold has already been factored in. Either way there's definitely a USD-neg bias in markets with COVID concerns and now Trump trying to delay November's election both playing out even if there have been trading opportunities both sides.
After GBPUSD had that early dip yesterday to 1.2945 we then saw the pair finally accelerate through 1.3000, 1.3060 then 1.3100 to post 1.3145 highs earlier this morning before retreating to 1.3114 as I type.EURGBP broke down through 0.9030 to post 0.9018 lows and helping to underpin GBPUSD but now rallied ,helped by the month-end demand, but failing above 0.9060 on this latest attempt. GBPJPY found support at those 136.20 bids this time around but failing 137.40 for the moment although still underpinned.
I stay poised to sell GBP rallies overall as my preferred side and buy back in the dips as ever but no point in standing in the way of a truck hurtling at great speed. I'm not sure why the Pound is currently the best of a bad bunch but price action says it is so who am I to argue.Patience will continue to be a virtue and entry level key as always. I still expect to continue seeing dip demand to fill a few holes should we start retreating but let's see where we are once month-end flows are out the way.
USDJPY has broken down through the 104.75-80 support to post lows of 104.19 and I've gratefully banked some pips on the move lower from my long-held shorts. EURJPY found support at 123.50 but has capped at 124.30 so far amid some rally-sell interest on core pairs again this morning. Still underpinned on the generally better risk sentiment though. EURUSD based at 1.1750 and took good advantage of the USD supply with month-end flows also helping but finding life above 1.1900 a little tougher atm amid some general Euro supply but underpinned still with the general Greenback selling and final month-end flows still to play out. USDCHF capped at 0.9150 and has retreated steadily, albeit wiping its feet around 0.9100, to test those 0.9060 bids with EURUSD marching ever higher but with EURCHF still underpinned and the SNB ever vigilant in the dip.
AUDUSD has capped now at 0.7225 to retreat to 0.7180 but still underpinned as the USD supply continues. USDCAD has been range-bound and seen some good two-way business between 1.3400-60 amid variable oil/softer USD tones overall and large option expiry interest today at 1.3400 and 1.3500.
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 peaceful week-end.
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