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  • Writer's pictureMike Paterson

US Dollar in decline still

Thursday 17 December 2020

The US Fed FOMC last night left interest rates on hold but maintained dovish tones understandably and after an initial disappointment/reasssment we've seen the Greenback in retreat again across the board, accelerated by bursting through some key levels on many pairs. Powell made it clear they are keeping their powder dry for worse times ahead and remain ready to ease as per my Tweets last night.

COVID is still casting its sad shadow therefore but risk sentiment continues to hold firm with equities and oil higher again on hopes of greater injection of liquidity. Crazy days but it doesn't look like things are changing anytime soon. All major CBs face a similar dilemma and at 12.00 GMT today we will get the latest thoughts from the BOE. Don't expect any changes to the script with Brexit uncertainty always in the mix too.

GBPUSD has now found good support/demand into 1.3450 and that area held again in the post-FOMC immediate aftermath retreat which proved short-lived. Cue a steady rally through 1.3550 resistance to post highs of 1.3585 as I type. EURGBP held just below 0.9000 yesterday but has run into a solid wall of sellers at 0.9040 and now testing 0.9000 (GBPEUR 1.1110) again as GBPUSD remains firm helped by some Brexit positive impetus again. GBPJPY has now found good support at 139.50 on the firmer risk/GBP double whammy and pushed up in steady fashion to look at week-highs of 140.20 again.

Patience continues to be a virtue and rally-selling in GBPUSD can still bring reward but entry level key as always. Definitely still finding some dip demand amid all the USD supply so equally a case for going long in the dips too as I've mentioned for a while now. Brexit still the large elephant in the room.

USDJPY failed into 104.00 post-FOMC statement and fell back through support areas amid the softer USD tones but firmer risk sentiment still providing some support on JPY selling.EURJPY remains tightly bound amid USD and cross flows. EURUSD held 1.2130 again post-FOMC statement which we know was a decent line in the sand and now up through key resistance at 1.2220 to post 1.2244 but capping a little as I type. Seems there is little the ECB can do to stem the tide as the Greenback continues to be sold and the EUR broad weighted index hits 11-year highs. USDCHF remains on the back foot and clinging on to 0.8825-30 again from 0.8890 as EURUSD rallies but with the SNB still ever watchful as they said again this morning after leaving interest rates on hold as expected.

AUDUSD remains underpinned, now at 0.7550, and broken up through 0.7600 to post 0.7640 as the USD selling and AUDJPY demand continues.USDCAD failed above 1.2780 on the post-FOMC USD rally but now testing 1.2700 again amid the softer USD/firmer oil price combo.

Markets are ever-fickle so don't forget to contact me if there's areas 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.

Interbank rates: 08.36 GMT

GBPUSD 1.3577

EURUSD 1.2233

EURGBP 0.9010

GBPEUR 1.1097

GBPAUD 1.7812

GBPCAD 1.7248

GBPJPY 140.12

GBPZAR 20.0255

GBPHKD 10.5263

USDJPY 103.18

USDZAR 14.7578

EURJPY 126.23

EURCHF 1.0810

EURHKD 9.4857

AUDUSD 0.7621

USDCAD 1.2702

USDCHF 0.8837

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