Soggy risk sentiment and reality check for the Pound

Friday 22 January 2021

Equities and commodities turning lower again as we head into the week-end, with perhaps some profit-taking therefore in play but really just an example of the ever-fragile risk sentiment which has also been prompted by a further slide in Bitcoin.

The Pound ran into some reality-check rally sellers yesterday, including me, and has moveed lower this morning helped by some soggy headline Retail Sales, PMI and government borrowing data. This evening at 19.45 GMT amid thin liquidity newly-ensconced US President Biden delivers a speech on the COVID-led economic turmoil over there and adding to the softer risk tones.

As I warned yesterday Forex pairs are still ranging overall as the jury remains out so keep playing what's in front of you and don't over analyze.

GBPUSD finally capped into 1.3750 but then held 1.3700 where I had warned on Twitter of decent bids building but failed to break back up through 1.3730 and now tested 1.3650 amid that softer UK data and stops being triggered through 1.3700 and 1.3680. EURGBP found the key level at 0.8830 a step too far as per my Tweet and after some 40-70 range trading now testing 0.8900 again as I type (GBPEUR down to 1.1220). GBPJPY found a base at 141.50 yesterday on the firmer risk/GBP tones but capping at 142.20 as I highlighted yesterday and now becoming a decent line in the sand again.

I still have a naturally bearish stance on GBP overall and remain poised to sell into rallies but respecting dip demand still with price action ever fickle. Equally a case for going long in the dips though as I warned yesterday as we continue to range. Patience and not getting greedy remain key.

USDJPY duly found a base around 103.30 where we had those large option expiries but equally contained by the other option interest up to 103.75 I highlighted on Twitter. EURJPY found support at 125.40 and now back up through 126.00 with core pair demand outstripping softer risk plays post ECB. EURUSD had based at 1.2130 before the ECB who in turn offered little of note and the lack of really dovish tones has helped underpin again as I warned in my update yesterday but failing at 1.2190 so far. USDCHF has broken support at 0.8860 but holding 0.8840 so far with the SNB ever watchful and the EURUSD rally capping.

AUDUSD duly capped at the strong 0.7780 area and now testing the decent support at 0.7720 amid the softer commodity prices and risk-off AUDJPY supply again.USDCAD found support at 1.2620 then 1.2660 and now testing 1.2700 as I type helped by the softer oil price and CADJPY selling.

As we look at trading opportunities to begin the year it's even more important not to over analyze but trade the price action with discipline and patience.

The mighty Shrimpers remain at home tomorrow and a must-win game versus Mansfield. I just wish I could be there to cheer them on.....

Let's continue to be careful out there in all things. Staying safe must be our main priority still. Have a good weekend everyone.

Interbank rates: 08.28 GMT

GBPUSD 1.3660

EURUSD 1.2163

EURGBP 0.8897

GBPEUR 1.1235

GBPAUD 1.7686

GBPCAD 1.7347

GBPJPY 141.65

GBPZAR 20.5691

GBPHKD 10.5906

USDJPY 103.63

USDZAR 15.0592

EURJPY 126.03

EURCHF 1.0766

EURHKD 9.4265

AUDUSD 0.7729

USDCAD 1.2688

USDCHF 0.8852