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  • Mike Paterson

US Dollar demand notable after FOMC

Thursday 28 January 2021

The US Federal Reserve FOMC yesterday kept rates and policy on hold as expected but in the wake of any particularly dovish policy tones the markets have continued in risk-off mode with equities generally in retreat and some USD preference again in this ever fickle ongoing scenario full of COVID-led uncertainty.

A reminder that month-end USD flows are forecast to be negative so keep that in mind over the next couple of days still.

As I keep highlighting we're still ranging overall with the various uncertainties continuing and the jury remains out so keep playing what's in front of you and don't over analyze.

GBPUSD failed at 1.3760 then 1.3725 and 1.3680 post-FOMC The hold of that area has added to the cap this morning and more re-sells added as per my tweets. Still not expecting a collapse though with the ongoing USD supply but a decent fall to 1.3635 so far. Good jobbing pips expected again amid all the uncertainty.Offers building at 1.3665, 1.3680 and 1.3700 then 1.3720-25 and 1.3750-60 again with more at 1.3785 and 1.3800. Bids now at 1.3620-25 and 1.3600 still with more at 1.3585 and 1.3560 then 1.3530-35 and 1.3500.

EURGBP finally broke down through 0.8825-30 amid the GBPUSD demand/EUR supply but has since rallied to 0.8870 and helping push down GBPUSD along the way. Offers at 0.8880-85 and 0.8900 still (710m EUR Puts in the mix rolling off today too) with more at 0.8915-20 still then larger at 0.8935, 0.8950, 0.8980-85 and 0.9000. Bids building at 0.8845-50 and 0.8820-25 then 0.8800 with more at 0.8785 and 0.8760 then 0.8735, 0.8720 and 0.8700. I remsin a dip buyer overall as a trading preference but good two-way pips seen too.

GBPJPY foud a decent base at our old friend 142.30 on the firmer risk/GBP tones but failing into 142.90 and now testing 142.30 again this morning. Bids still at 142.25-30, 142.00, 141.80, 141.60, 141.25-30 and 141.00 still then 140.80, and 140.60. Offers at 142.65-75 and 143.00 again with more at 143.20 and 143.50 then 143.75 and 144.00.

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 and that month-end demand also notable. Equally a case still for going long in the dips therefore as we continue to range. Patience and not getting greedy remain key.

USDJPY found a base at 103.60 this time and some buy-backs made but equally failing into 104.40 as we continue to range amid the fickle risk and USD sentiment and some re-sells made as per my tweets. Bids now at 104.20 and 104.00 then 103.80 (560m USD Puts), 103.60-65 and 103.50 (600m Puts) then 103.25-35 again and 103.00. Offers at 104.50, 104.75-80 and 105.00 then 105.20, 105.35 and 105.50 I remain a rally seller overall but still not being greedy on the buy backs.

EURJPY held 125.60 and rallied on the USDJPY demand but failing at 126.30 as I type. Offers building at 126.35 and 126.50, 126.75-80 and 127.00 still with more at 127.25-30 and 127.50.Bids building at 126.00 then 125.75-80 again and 125.60 then 125.40 still with larger at 125.20 and 125.00.

EURUSD held 1.2060 on its latest retreat bu failing at 1.2125 on the bounce. Buy backs and re-sells duly made per ongoing strategy as we're still ranging overall. Offers now at 1.2120-25 then 1.2150 again, 1.2165 and 1.2180 then 1.2200,1.2220 (600m expiries too) and 1.2250. Bids building at 1.2080 again with more at 1.2055-60 still then 1.2030 strong into 1.2000. I remain a rally seller overall as my preferred side as we continue to range but still respecting dip demand.

USDCHF duly held the 0.8860 line on the EURUSD retreat but failing into the 0.8920 area again.SNB ever watchful. Offers at 0.8920-25, 0.8950, 0.8980 and 0.9000. Bids building at 0.8880 then 0.8860,0.8830-35 and 0.8800 still. EURCHF bids still at 1.0750 then 1.0730 and 1.0700 with more at 1.0680 and 1.0660. Offers at 1.0800 and 1.0830 again then 1.0850, 1.0880 and 1.0900. I continue to play both sides amid all the USD/sentiment uncertainty but dip buying the preference still.

AUDUSD has made a larger retreat than I expected amid the USD demand, commodity currency selling and AUDJPY risk-off supply triple-whammy but I'm not complaining. Pips duly banked in the retreat, albeit too early but I hope the ongoing steer helped. Bids now at 0.7580, 0.7550, 0.7535, 0.7520 and 0.7500 then 0.7485 and 0.7460. Offers now at 0.7620, 0.7650, 0.7675-80, 0.7700, 0.7720 and 0.7750-60. Rally-sell still my preferred strategy. AUDNZD has 530m expiries at 1.0665 and NZDUSD has 650m at 0.7050.

USDCAD found a good base at 1.2750 amid the firmer USD/softer risk tones and making steady progress to test 1.2880 as I type. Offers now at 1.2880-85, 1.2900, 1.2930, 1.2960, 1.2975 and 1.3000. Bids building at 1.2830, 1.2800, 1.2780, 1.2750, 1.2730 and 1.2700. No option interest today.

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. I can help with this in my 1-2-1 sessions and now is the time, more than ever, to get on board with those if you haven't already done so. Contact me to take advantage of currently reduced prices for January.

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

Interbank rates: 08.28 GMT

GBPUSD 1.3652

EURUSD 1.2105

EURGBP 0.8867

GBPEUR 1.1278

GBPAUD 1.7916

GBPCAD 1.7534

GBPJPY 142.35

USDJPY 104.30

EURJPY 126.22

EURCHF 1.0765

AUDUSD 0.7617

USDCAD 1.2847

USDCHF 0.8894

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