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  • Writer's pictureMike Paterson

Jury still out after Friday's free-fall

Monday 29 November 2021

We've seen some recent recovery from the lows in forex, equity, bond and oil markets since Friday's extended falls but the world remains a fragile place still so no one should get too excited that we've seen the lows of this particular wobble just yet. COVID fears and concerns very much still lurking with markets second-guessing how it might all impact CB thoughts and action.

Throw month-end flows into the mix and a few lumpy options rolling off today and it should be an interesting day ahead with US traders/institutions returning from their Thanksgiving long week-end, albeit the algos have been working in their absence. We started to see some EOM flows on Friday per my tweet which was the Spot dealing day but it's usual to see more right up until the London 4pm fix on the final day.These flows may not be as predictable/reliable as they were but ignore them at your peril.

As always, don't over-analyze but keep your focus on price action in core and cross-pairs and recent ranges to see whether we hold or break and what levels present value for money. If in doubt, stay out.

GBPUSD: Those fresh 11-month lows of 1.3280 duly held the falls on Friday but rallies limited to 1.3365 so far amid all the cross flows. GBPUSD rally sellers, including me, ever poised while keeping one eye at least on the EURGBP and GBPJPY cross flows. EURGBP: Those Friday highs of 0.8495 (GBPEUR down to 1.1771) helped to push GBPUSD lower but now the reverse is true as we see a retreat below 0.8450 (GBPEUR back up to 1.1820). Expect more 2-way business. GPJPY: 150.60 provided good support on Friday and again this morning so far as we see some better risk tones and core pair dip demand returning.

I remain a GBP rally seller across the pairs overall as my preferred trading side albeit still against the grain currently so being patient as ever. These markets are ever-fickle so good/tight position management essential.

EURUSD: Support/bids now at 1.1260 after Friday's hold at 1.1200-20 amid the EUR funding-currency/safe-haven demand that I highlighted but sellers still poised above 1.1320 and good size option interest at 1.1300 today.

USDJPY: 113.00 tested amid the COVID risk-off panic on Friday after some volatile price action and again this morning but some decent demand pushing it back up to 113.40 helped by the better risk tones so far as I type.

EURJPY: A bounce off 127.80 on Friday as the Euro found that support of its own but equally finding sellers ever poised, this time at 128.60 albeit with support at 127.50 so far. USDCHF: Support now coming in at 0.9220 with the SNB ever vigilant but rallies capped at 0.9280 helped by EURCHF falling further to test 1.0420 and large option expiries today at 0.9275. EURCHF: New lows of 1.10422 as CHF demand prevails and EUR demand fades amid the better risk but with SNB shadow lurking.

AUDUSD: A good hold of 0.7115 with some AUDJPY demand and good size option interest at 0.7100 today helping to support. Sellers poised though still. USDCAD: Capped at 1.2800 as oil rallied off it 13% fall on Friday as we see some CADJPY demand return and general USD supply but 1.2725 providing support now keeping range tight amid the fragile market conditions.

A wonderful win for the mighty Shrimpers on Saturday should help re-charge some self-belief amongst the players. Still in a sticky position but we'll keep believing.

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

Interbank rates: 08.43 GMT

GBPUSD 1.3331

EURUSD 1.1270

EURGBP 0.8453

GBPEUR 1.1828

GBPJPY 151.10

GBPCAD 1.6997

GBPZAR 21.4770

GBPHKD 10.3877

USDJPY 113.35

EURJPY 127.75

EURCHF 1.0430

EURHKD 8.7825

AUDUSD 0.7139

USDCAD 1.2750

USDCHF 0.9254

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