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  • Writer's pictureMike Paterson

Markets have another reality check

Friday 1 October 2021

Move over month and quarter-end USD demand and other flows as markets wobble again to the sound of risk-off sentiment returning with equities and oil being dumped again. USDJPY buying has been notable all week but that demand found itself exhausted around 112.00 and the renewed JPY and CHF demand has helped drive cross and core pairs lower. I hope my steers have helped you through this interesting week.

Some dip demand and better risk tones returning this morning as Europe gets underway with some bargain hunting notable understandably but rally sellers, inclduing me, remain poised.

Amid all this market uncertainty I will repeat that patience and discipline in trading are key, as ever, and not being greedy. Ignore the noise and countless amount of "analysts" trying to explain the reasons for moves. Just focus on the price action and decide what presents value or doesn't.

GBPUSD: Another failure above 1.3500 yesterday amid the general GBP selling and helped by renewed GBPJPY supply after some decent profit taking during the day but the break back down through 1.3450-60 triggered further falls to test 1.3425-30 support again. I remain a rally seller while keeping an eye on EURGBP and GBPJPY as always.

EURGBP: The breakdown through 0.8615-20 triggered further falls to test 0.8580 as GBP rallied yesterday but since bouncing through 0.8620 only to fail. Good two-way action expected still. GBPJPY: Steady retreat as the month-quarter-end JPY supply faded and we've seen extended falls into 149.20 amid the softer risk tones which has suited my core pair shorts.

I remain a GBP rally seller across the pairs but being patient as ever. These are risk sentiment markets and ever fickle so good/tight position management essential.

EURUSD: Holding 1.1560 now on the latest retreats after failing to rally back above 1.1600. Some pips banked in the retreat again. The pair still finds itself in the middle of cross-flow action and variable risk plays. USDJPY: Capped at 112.15 as the month-quarter-end demand/JPY supply ran out and since been all the way back down to 111.00 amid the softer-risk sentiment. EURJPY: Broke back down through 129.80 after being unable to break back up through 130.00 as I highlighted yesterday and now testing 128.60 on the softer risk tones. USDCHF: Now finding a base at 0.9300 as EURUSD retreats and with the SNB ever vigiliant as EURCHF breaks lower through 1.0800 amid the softer risk CHF demand. EURCHF: Holding 1.0775 at the moment after the softer-risk retreat but with SNB shadow ever present.

AUDUSD: The reversal back up through 0.7220 triggered further buying to test 0.7260 only to fail and test 0.7200 helped by the AUDJPY supply. Very large option interest there today should help keep price contained if some degree of normal service has been resumed. USDCAD: Yesterday saw a good cap at 1.2755 with large option interest there and the subsequent break back below 1.2700 support (also an option strike level) triggered rapid falls into 1.2630 amid the USD supply as month-end demand ran dry. We've been back up to 1.2740 since on the CADJPY selling as oil falls. Option interest still casts a shadow today too. Forewarned always forearmed in forex.

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

Interbank rates: 08.30 BST

GBPUSD 1.3455

EURUSD 1.1585

EURGBP 0.8611

GBPEUR 1.1613

GBPJPY 149.73

GBPCAD 1.7115

GBPZAR 20.2012

GBPHKD 10.4853

USDJPY 111.23

EURJPY 128.87

EURCHF 1.0791

EURHKD 9.0290

AUDUSD 0.7208

USDCAD 1.2724

USDCHF 0.9314

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