Risk appetite wanes on hawkish FOMC Minutes
Thursday 6 January 2022
We've seen a wobble in risk appetitite and some USD demand since the hawkish US Federal Reserve FOMC Minutes last night with some JPY demand notable again. 30- year US bond yields have posted fresh recent highs not seen since October with 10-year not far behind while Gold has once again run out of steam and now now 1795 after failing into 1830. Commodity currencies have weakened but oil prices as on the rise again this morning and helping to support CAD.
Forex pairs are still contained in tight ranges amid the firmer USD/softer risk tones but not travelling too far with core pair and risk dip demand still being seen/expected. Hawkish Fed is not exactly ground-breaking news in recent weeks. Good two-way business to be had since the Minutes's release and we should see more amid the second-guessing with first US rate hikes being priced in between March-May.
As always, don't over-analyze or second-guess but keep your focus on price action in core and cross-pairs and identify recent ranges to see whether we hold or break and what levels present value for money. Patience will invariably be a virtue but don't confuse patience with being stubborn. A new year maybe but same rules of trading always.
GBPUSD: We saw a test of 1.3600 yesterday but the firmer USD tones and some risk-off GBPJPY supply since the FOMC has helped push the pair lower to look at 1.3480 again before finding support. GBPUSD rally sellers, including me, ever poised while keeping one eye at least on the cross flows and risk sentiment. EURGBP: Some risk-off EUR demand and GBPJPY supply helping the pair to hold 0.8330-35 support (GBPEUR 1.2000 resistance) and now testing 0.8375-80 (1.1940). Should continue to see good two-way amid the variable risk tones. GBPJPY: 156.50-80 support area now broken amid the renewed softer but 155.90-156.00 provides a decent line next. Sellers remain poised on this and core pairs when momentum fades but caution still required for the moment.
I remain a GBP rally seller across the pairs overall as my preferred trading side but being patient as ever. These markets are ever-fickle so good/tight position management essential.
EURUSD: 1.1280-85 providing support after a failure around 1.1340 this time. USDJPY: Capped at 116.20 post-FOMC after earlier holding 115.60 and now testing those lows again amid the softer risk tones and some USD selling returning this morning. EURJPY: 130.60 support still holding but sellers prevailing at 131.40 again after the 131.60 highs. EUR risk-off demand helping to support. USDCHF: Support now at the pivotal 0.9160-70 area with the SNB shadow ever present but failing into 0.9200 on softer risk CHF demand. EURCHF: 1.0350-60 resistance broken amid the softer-risk EUR demand generally but tempered by some CHF demand and failing at 1.0390. SNB ever vigilant.
AUDUSD: A steady retreat into 0.7150 from 0.7260 and showing just how fickle these markets are. Large option interest tomorrow notable and may well have helped the push lower in thin liquidity with the sell side taking advantage of the FOMC fall-out. USDCAD: Support came in at 1.2680 after the break of 1.2720 but the firmer USD/softer oil rally post-FOMC failing into 1.2820 as oil prices rally and we see some USD weakness this morning.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.48 GMT