Reality check time again for the Pound
Tuesday 15 December 2020
After the euphoria being shown this time yesterday for the Pound we've seen the reality check back in place amid some less than positive Brexit comments and London/much of neighbouring Essex and Hertfordshire being escalated into COVID Tier 3 restrictions as of 00.01 tonight. Talk of a new strain of the corona virus in the UK South East region adding to the general concern along with some painful UK employment data this morning.
COVID therefore still casting its sad shadow as I've been warning, not just in the US but also with key areas of Europe going back into lockdown. Markets are still second-guessing the fall out to come and the US stimulus package unknowns but risk sentiment continues to hold firm with equities and oil higher on hopes of great injection of liquidity. Strange ol' world.
GBPUSD yesterday capped above 1.3440 with strong technical resistance combining with the softer Brexit tones and now holding the pivotal 1.3280 again on the latest retreat. EURGBP has found a base at 0.9080 and then 0.9100 and rallied this morning up through 0.9120 but capped at 0.9138 (GBPEUR support at 1.0930) as GBPUSD holds 1.3280 again.GBPJPY has tested good support at 138.30 this morning after capping into 139.50 yesterday.
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 reward but entry level key as always. Definitely still expecting some dip demand amid all the volatility as I've warned for a while now. Brexit still the large elephant in the room.
USDJPY has duly failed into 104.20 again but holding 104.00 amid the variable USD and risk sentiment. EURJPY remains tightly bound currently between 126.00-126.80 amid variable sentiment and cross flows on both core pairs. EURUSD failed into 1.2180 again yesterday amid some general USD demand but equally finding demand below 1.2130 again and now 1.2160 but tightly bound as the European session gets underway.A reminder that we have large EUR option Calls at 1.2000 this week to keep in mind as well.USDCHF remains on the back foot but tightly bound still and now clinging on to 0.8850 again as EURUSD rallies but with the SNB still ever watchful.
AUDUSD remains underpinned into 0.7500 after another wobble on some RBA comments regarding more liquidity and reports from China that they have halted coal imports. USDCAD failed above 1.2780 after holding 1.2720 and now been down to test 1.2750 this morning amid the softer USD/firmer oil price combo.
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. Have a good week one and all.
Interbank rates: 08.30 GMT