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  • Writer's pictureMike Paterson

FOMC leaves markets divided

Thursday 28 July 2022

Last night the US Fed's latest FOMC policy decision duly delivered a 0.75% rate hike as mostly expected but with the Fed not ruling further hikes while being very aware of fragile economic performance/risk of recession (as I warned here yesterday) the markets seem divided on whether Powell was hawkish or dovish in his presser comments. I personally didn't see a lot of change in the FOMC position but the Greenback has fallen in the aftermath with USDJPY leading the way down to 135.10 before a bounce but capping at 135.80.

Variable risk sentiment bringing mixed tones and price action for equities, gold and oil as the jury deliberates still. Month-end Spot value date London fix yesterday came and went without any USD supply of note so maybe executioners were waiting for the Fed and responsible for some of the selling since and we can expect more into final flows tomorrow. Euro still looks soggy overall.

Either way, don't over-analyse but be ready with your preferred levels/strategy, place orders and let the algos do the heavy work. Discipline is key as always but equally hesitation can often ruin a great idea.

GBPUSD: Holding the latest support line of 1.12020 having capped above 1.2050 and needed little excuse post-FOMC to finally blast through the 1.2080-00 offers that I had highlighted. EURGBP retreat helped support along with the general USD supply, possibly month-end linked as I had warned. I will stand poised for rally resells but with some caution for the moment.

EURGBP: 0.8400 bids/support now gone amid yesterday's extended retreat with general EUR supply still. I still think we'll see two-way pips jobbing opportunity but soggy EUR will limitt rallies as I've warned before.GBPJPY: Now capping at 166.30 after its extended rally pre-FOMC but holding 164.50 in the retreat after as the JPY/risk jury remains out and USDJPY led the USD sell-off.

EURUSD: That Support I highlighted at 1.0100-15 held well and a decent rally post-FOMC but sellers including me prevailing above 1.0200 for the moment amid general EUR supply. Some option interest in play again should we rally with larger tomorrow.

USDJPY: Capping at 137.50 and with re-sells duly placed we've seen a steady fall to 135.10 post-FOMC, pausing for breath only at the 136.30-50 support area. EURJPY: Capping at 139.50 this time and a steady retreat to 138.00 before finding support. Sellers poised still whenever risk turns and/or reality checks back into town as I've been warning. USDCHF: Yes folks, as highlighted here a few times, and a remnder on Twitter yesterday, we've had failure yet again at 0.9660 amid the USD retreat post-FOMC and general CHF demand still. SNB will be keeping an eye on things as ever but seemingly not in a rush at the moment.EURCHF: Capping above 0.9800 yesterday and falling back below 0.9780 this morning as core pairs find rally sellers again on the soggy EUR tones. SNB will be watching 0.9700-20 but sellers will remain poised.

AUDUSD: A good rally post-FOMC after another good hold around 0.6920 to breach 0.7000.Capping into 0.7020 helped by some AUDJPY and AUDCHF supply. GBPAUD holding 1.7360 in latest retreat but tightly bound still after capping at 1.7420 again. NZDUSD also tightly bound again after a good rally from 0.6200. Capping at 0.6250 this time but holding 0.6250. GBPNZD holding 1.9350 this time after capping at 1.9450 and still tighlty bound.USDCAD: Capping at 1.2900 again post-FOMC and the firmer oil/softer USD sees a break of 1.2820-40 support area which now becomes pivotal. I expect some good two-way business still overall amid the variable risk/oil and USD tones. Decent options in play again today should we rally.

Let's continue to be careful out there.

Interbank rates: 08.42 BST

GBPUSD 1.2171

EURUSD 1.0195

EURGBP 0.8378

GBPEUR 1.1938

GBPJPY 165.12

GBPCAD 1.5590

GBPCHF 1.1656

GBPZAR 20.3542

GBPHKD 9.4843

USDJPY 135.64

EURJPY 138.33

EURCHF 0.9787

EURHKD 7.9446

AUDUSD 0.6994

USDCAD 1.2810

USDCHF 0.9596

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