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  • Writer's pictureMike Paterson

Powell casts doubt over pace of Fed tightening

Wednesday 12 January 2021

Forex pairs still generally ranging overall amid softer USD tones and equity markets in bullish mood still after US Fed Chair Powell yesterday left the door open on the timing of policy normalization which caught interest rate hawks a little off-guard and the happy-clappy risk brigade were ready to jump back in.

For GBP traders keep your eye on the developing storm regarding PM Johnson and lockdown parties. Today he comes to Parliament to answer questions at the weekly PMQs. He may well try and hide behind the ongoing investigation but the feeling of anger amongst his own MPs should not be underestimated.

As always, don't over-analyze or second-guess but keep your focus on price action in core and cross-pairs and identify recent ranges to see whether we hold or break and what levels present value for money. Patience will invariably be a virtue but don't confuse patience with being stubborn.

GBPUSD: Support duly coming yesterday at 1.3560-80 as I highlighted here and on Twitter so I hope the steer helped.Firmer risk tones now sees another rally, breaking 1.3620 finally and a test of the equally strong 1.3650 resistance amid the EURGBP supply/GBPJPY demand double whammy. GBPUSD rally sellers, including me, ever poised while keeping one eye at least on the cross flows and risk sentiment. EURGBP: Ranging still and holding the strong 0.8330 support area again (GBPEUR resistance 1.2000) but equally failing around 0.8350 (GBPEUR support 1.1975) again. Should continue to see good two-way buiness. GBPJPY: 157.00-20 support now being tested after failing at 157.40. Larger behind at 156.80 amid the firmer risk tones but rally sell interest still as risk remains variable.

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

EURUSD: 1.1320 support now amid the softer USD tones but failing into 1.1380 as a little USD demand returns as I type and the generally firmer risk EUR supply. USDJPY: Still capped at 115.50-60 but holding 115.20 this time helped by the risk-on JPY supply. EURJPY: 130.80-00 support now amid ongoing firmer risk JPY supply but sellers lurking at 131.20 still. USDCHF: 0.9220-30 support still as I highlighted yesterday here but equally tightly bound after failing at 0.9260 helped by EURCHF failing above 1.0500 but with the SNB shadow ever present. EURCHF: SNB ever vigilant but failing above 1.0500 still.

AUDUSD: Firmer risk AUDJPY demand and stronger commodity prices still helping to underpin but failing to make headway through 0.7220 this time. Support now coming in at 0.7180-00.USDCAD: Now retreating further down to 1.2545 amid the firmer oil/softer USD flows with CADJPY demand in play again. Sellers poised 1.2580-00 and larger 1.2630-50. Support into 1.2500.

A brilliant win last night for the mighty Shrimpers of Southend and that's two on the spin now. Heady days ! Seems there really are reasons to be hopeful now.

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

Interbank rates: 08.58 GMT

GBPUSD 1.3636

EURUSD 1.1372

EURGBP 0.8340

GBPEUR 1.1987

GBPJPY 157.18

GBPCAD 1.7093

GBPCHF 1.2582

GBPZAR 21.0940

GBPHKD 10.6139

USDJPY 115.31

EURJPY 131.12

EURCHF 1.0500

EURHKD 8.8545

AUDUSD 0.7208

USDCAD 1.2550

USDCHF 0.9234

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