A little calm returns, but for how long?

Mike Paterson
Jul 20, 2021
3 min read

Tuesday 20 July 2021

Yesterday saw a further meltdown in equities, commodities and bond yields amid rising Covid concerns not least of which in the UK and we've seen further declines in the Pound too helped by the risk-off JPY demand driving GBPJPY lower.That CAD weakness I said was "notable" turned into a rout as oil prices fell further in the wake of the OPEC+ decision and risk-off CADJPY selling triggering stops on USDCAD along the way.

This morning we've seen a partial recovery in equities, oil and US bond yields which has seen some relative calm return but the backdrop remains fragile with Bitcoin dropping further and risk sentiment can turn very quickly so we'll take nothing for granted.Beware the dead cat bounce. A little USD demand prevailing generally as European trading gets underway but these current moves are risk, not USD, driven.

Patience and discipline in trading are key as ever and not being greedy even with some greater levels of intra-day volatility returning. Still some good two-way pips to be had amid the mayhem so picking your entry/exit levels is more important than ever.

GBPUSD: Failure to get back above 1.3760, then 1.3720 then the crucial 1.3700 area set the tone yesterday and with risk-off GBPJPY selling also helping to cap we've now been down to 1.3635 this morning. I remain a rally seller while keeping an eye on EURGBP and GBPJPY as always.EURGBP: The 0.8600-20 offers finally gave way as some EUR risk-off funding currency drove EUR pairs higher while GBP sentiment remained soft and capping GBPUSD. Highs so far of 0.8642 but sellers lurking at 0.8650-80.

GBPJPY: Capped at 150.50 amid the risk-off selling but finding a little support below 149.50 as some relative calm returns. Key driver on GBPUSD as ever.

I remain a GBP rally seller across the pairs but being patient as ever and that's now reaping more rewards. I hope the steer has helped. Risk to the downside still overall.

EURUSD: A good hold of 1.1760 amid EURJPY supply and USD demand before driving higher as EUR funding currency demand kicked in but failed at the key 1.1820-25 area per my tweet. USDJPY: Capping at 110.00 set the tone and JPY risk-off demand saw the pair fall steadily to test 109.00-10 before recovering.Pips banked in the retreat per my tweets. Decent rally to 109.65 but all relative in these days of tight ranges. EURJPY: 128.80 the new support line and now testing 129.40 on the firmer risk tones.USDCHF: Another failure at 0.9220 as EURUSD rallied but holding 0.9160 as EURCHF remains underpinned at 1.0820 with the SNB ever vigilant. EURCHF: A good hold of 1.0820 so far with SNB shadow/help ever present but rally sellers still poised amid the variable risk tones.

AUDUSD: USD demand helping to push the pair down to look at 0.7320. Rallies weak after the RBA reaffirmed no rate hikes til 2024 and reports that they might even be consdering increasing QE meanwhile. USDCAD: Early European trading yesterday saw the pair on a mission amid the firmer USD, softer oil and CADJPY selling triple whammy. Failure eventually above 1.2800 and dropping this morning amid firmer oil/CADJPY demand but equally decent support now at 1.2730.Large options at 1.2750 lurking on Thursday.

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

Interbank rates: 08.17 BST

GBPUSD 1.3640

EURUSD 1.1785

EURGBP 0.8634

GBPEUR 1.1580

GBPJPY 149.62

GBPCAD 1.7417

GBPZAR 19.8698

GBPHKD 10.5906

USDJPY 109.61

USDZAR 14.5493