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  • Writer's pictureMike Paterson

The uncertainty continues

Friday 23 October 2020

Forgive me if this sounds boring but another week ends with markets still second-guessing the various scenarios that are playing out throughout the globe including US Election/stimulus package, Brexit and COVID.

FX pairs therefore still ranging and somewhat volatile as the changes in sentiment reflect themselves in the ever-fickle world of Forex. I have long warned not to be stubborn or get greedy and current conditions are a classic example.

GBPUSD broke down through 1.3120 and then finally 1.3070-80 and testing 1.3050 this morning but equally we've seen a rally back above 1.3100 on better risk tones and some GBPJPY demand not to mention 1.1bln GBP options rolling off between 1.3090-00 today. EURGBP based at 0.9010 and once again the big line in place at 0.9000 since early Sept is being defended still with month-end demand looming again too. Rally sellers poised though as we continue to range and core pairs enjoy good two-way business.GBPJPY found a cap at 137.40 but holding 136.75 on the retreat as sentiment and core pairs find dip demand as I type.

No change in my basic view, just different levels in play atm. 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 entry level key as always. I still see dip demand though with markets and risk sentiment still in a state of uncertainty overall.Brexit remains the very big elephant in the room.

NB: UK Services PMI data out as I finish this section of the report and coming in under expectations pushing GBP lower as I type. No surprises there and the data will only get worse as COVID lockdown restrictions impact further on this sector that accounts for over 80% of UK GDP.

Those 1.1bln expiries between 1.3090-00 most certainly in play.

USDJPY duly held 104.50-55 where we had large option expiries yesterday and we tested 105.00 amid some general USD demand before retreating again. EURJPY found a cap at 124.00 amid the softer risk and core pair supply but holding 123.50 so far.EURUSD capped at 1.1860 yesterday and fell amid the firmer USD tones but since basing at 1.1780-90 and back up through 1.1830 as the pair continues to be flicked around amid the variable USD tones and cross flows. USDCHF capped at 0.9100 and now falling below 0.9050 again as EURUSD rallies with EURCHF falling but SNB casting its shadow still.

AUDUSD based around 0.7100 and currently rallying again on the better risk with AUDJPY demand notable. USDCAD has seen another retreat from 1.3180 amid the firmer/steady oil tones/softer USD and now down through 1.3130 as I type.

Markets are ever-fickle so don't forget to contact me if there's areas of trading 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 good week-end.

Interbank rates:  08.47 BST

GBPUSD   1.3090

EURUSD   1.1827

EURGBP   0.9034

GBPEUR   1.1067

GBPAUD   1.8345

GBPCAD   1.7188

GBPJPY   137.04

GBPZAR   21.1934

GBPHKD   10.1447

USDJPY   104.69

USDZAR   16.2093

EURJPY   123.82

EURCHF   1.0717

EURHKD   9.1666

AUDUSD   0.7134

USDCAD   1.3130

USDCHF   0.9061

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