Markets run for cover as PBOC acts to strengthen the Yuan

Tuesday 6 August 2019

Trump has now branded China FX manipulators and they in turn have denied any attempts at Yuan devaluation and responded by setting the USDCNY reference rate lower than prevailing market rates as well as issuing a truckload of paper both providing a sharp spike in the Yuan. Cue a sharp spike therefore in USDJPY and Yen pairs and reversal of the recent China-led Euro demand.

An over-reaction maybe and traders/algos have trimmed back a good amount of the USDJPY move and associated pairs but these are fickle Summer markets and it could be argued that the original moves over the past few days on the escalating US-China trade war were over-cooked too. Either way we remain in uncertain times with the trade war still robust and CNY volatility also a main driver. Elsewhere Brexit still casts a shadow over the Pound as the EU repeat their position of no fresh talks on the Withdrawal Agreement.

GBPUSD has seen the benefits of the Euro selling and GBPJPY rally though as EURGBP falls back from 0.9250 (GBPEUR up from 1.0810) to post 0.9198 (1.0885) and helping to underpin a move back up to test recent 1.2189 highs as I type but we've seen some supply from GBP rally sellers again. GBPJPY spiked to test 130.00 as the PBOC action caused a damage limitation scramble for cover but we've seen rally sellers up there help trim a few losses on a retreat back down to 129.40.

I remain GBP bearish overall and will continue to rally-sell as my preferred strategy amid all the uncertainty/indecision including Brexit/political fallout but happy to buy back in the dips as always.

USDJPY spiked up through 107.00 from 105.80 but we've seen a retreat to 106.34 since the 107.10 highs while

USDCHF held 0.9700 and has also rallied post-PBOC but failing so far at 0.9760 with EURCHF capping above 1.0930 on the general Euro retreat but dip demand still notable. EURUSD failed at 1.1250 and tumbled on the PBOC news as the Euro lost its sheen but equally continues to find inherent dip demand amid all the uncertainty but also capped by EURJPY and EURCHF supply.

AUDUSD found support from AUDJPY demand and with the RBA leaving interest rates on hold as expected to test 0.6800 but tempered by softer Gold prices post-PBOC. USDCAD remains caught up in the CADJPY and oil price fluctuations with dip demand at 1.3180 and sellers at 1.3230.

Fickle Forex markets ever prevailing so be ready with your entry/exit levels and orders as always.

Don't forget I offer 1-2-1 mentoring if there's areas of trading this latest volatility that you might need some further help with.

Have a good day out there one and all.

Interbank Rate 08.32 BST

GBPUSD   1.2175

EURUSD   1.1207

EURGBP   0.9203

GBPEUR   1.0871

GBPAUD   1.7914

GBPCAD   1.6068

GBPJPY   129.75

GBPZAR   18.0416

GBPHKD   9.4393

USDJPY   106.52

USDZAR   14.8075

EURJPY   119.38

EURCHF   1.0922

EURHKD   8.6822

AUDUSD   0.6797

USDCAD   1.3197

USDCHF   0.9743