Risk appetite returns
Wedenesday 1 December 2021
A topsy-turvy day yesterday which started with risk sentiment on the back foot again capping core Forex pairs but then came comments from Fed's Powell talking increased taper at the Dec 15 meeting and removing "transitory" from his vocabulary.
Cue a sharp spike for the Greenback and fall in equity markets before some levelling out and retracement and we've now seen some improved risk appetite in Asia and continuing into the European open with equities and oil making good gains. Month-end flows definitely added to the chaos yesterday too but now attention turns to the NFP data on Friday.
COVID fears and concerns very much still lurking with markets still going to keep second-guessing how it might all impact CB action despite all the rhetoric amid the increased economic uncertainty. Omicorn is definitely still a story very much unfolding and its impact unknown.
As always, don't over-analyze but keep your focus on price action in core and cross-pairs and recent ranges to see whether we hold or break and what levels present value for money. If in doubt, stay out.
GBPUSD: Was already being capped around 1.3350 helped by strong EURGBP demand but then fell sharply on the Powell comments to post 1.3195 in a rush before then rebounding back to where it came from around 1.3330. Supported by renewed GBPJPY risk-on demand and EURGBP capping at 0.8530. GBPUSD rally sellers, including me, ever poised while keeping one eye at least on the EURGBP and GBPJPY cross flows. EURGBP: Solid gains again yesterday amid the risk-off EUR demand but capping at 0.8532 (GBPEUR support 1.1720) . A decent base at 0.8500 (GBPEUR sellers 1.1765) now though with more support at 0.8480 still. Expect more 2-way business with rally sellers still poised amid the general uncertainty. GBPJPY: 149.80 provided the support line yesterday and a good rally as risk-on appetite returns but sellers into 151.50 capping the move so far. Should continue to see good two-way business as risk sentiment continues to be ever-fickle.
I remain a GBP rally seller across the pairs overall as my preferred trading side albeit still against the grain currently so being patient as ever. These markets are ever-fickle so good/tight position management essential.
EURUSD: Support came in at 1.1235 after the Powell-led fall from 1.1360 and some pips gratefull/unexpectedly banked.That 1.1360 line is now providing the retracement cap as is often the case. Support now at 1.1300-20 again. USDJPY: Further falls yesterday to test 112.50 before the sharp spike but 113.65 capping so far. EURJPY: 127.60 support yesterday but the risk-on rally is capping at 128.80 so far amid the variable risk tones. USDCHF: Support at 0.9160 with the SNB ever vigilant but then a sharp Powell-led spike to 0.9265 before retreating as EURCHF falls further as the risk-off EUR demand recedes and outruns any risk-on CHF supply.EURCHF: New lows of 1.0405 but with SNB shadow lurking around 1.0400 it seems for the moment.
AUDUSD: 0.7060 lows on the Powell comments bnad a strong recovery since on the better risk tones helped by good AUDJPY demand. 0.7173 capping this time so far with good size option interest at 0.7165 in play but now finding some support between 0.7120-40. USDCAD: Sharp spike from 1.2760 to 1.2835 on the Powell comments but capped at 1.2800-20 now helped by the rise in oil price and hence CADJPY demand.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.15 GMT