US Dollar still in retreat as markets wait on ECB

Thursday 21 January 2021 (21-1-21)

Equities still underpinned by hopes of further US stimulus plans and we've seen some more falls in the Greenback. Yesterday's announcement by the Bank of Canada produced some CAD demand adding to the softer USD tones as attention switches now to the ECB at 12.45 GMT and the presser at 13.30 where markets are expecting cautious/dovish tones still and we've seen some further EUR losses too. Earlier the BOJ refused to rule out negative rates which has provided a little JPY supply but USDJPY still on the back foot. Bitcoin has had another wobble and that's adding to the fragile risk tones again.

GBPUSD duly capped around 1.3700 but then held 1.3620 where I had warned of decent bids building both here and on Twitter and it's now back through 1.3720 to post 1.3745, not seen since April 2018. I said yesterday I was certainly respecting the softer USD atm along with EURGBP falling amid the struggling Euro and that view remains.EURGBP finally broke down through 0.8860 but held the next key level at 0.8830 (GBPEUR sellers at 1.1325) as per my Tweet only to cap at 0.8885 on its rally and now holding 0.8830 (1.1325) again as I type and helping to cap GBPUSD. GBPJPY found a base at 141.20 on the firmer risk/GBP tones and now broken back up through 142.00 but capping at 142.20 as I type.

I still have a naturally bearish stance on GBP overall and remain poised to sell into rallies but respecting dip demand still with price action ever fickle. Equally a case for going long in the dips though as I warned yesterday. Patience and not getting greedy remain key.

USDJPY failed above 103.80 this time before holding a decent line at 103.25-30. Rinse n repeat as we continue to range.

EURJPY found support at 125.25 after failing at 126.20 with general EUR supply notable again as we wait on the ECB.

EURUSD duly based at 1.2080 again before it has bounced up through 1.2120 once more helped by the softer USD tones but now capped at 1.2150 as I type. Let's see what the ECB delivers, or doesn't as the case may be.Risk to the topside if less dovish than expected/factored in.

USDCHF has been in retreat again on the softer USD and EURCHF tones but finding support at 0.8860 yet again as we continue to range with the SNB ever watchful. AUDUSD found a base this time at 0.7720 ahead of those large 0.7700 expiries and has made a decent rally to test 0.7780 helped by the softer USD tones and risk-on AUDJPY demand again.

USDCAD failed at 1.2720 but was clinging on to 1.2700 around option expiriy time where we had that large interest as I highlighted here and twitter but the BOC helped drive it lower at the same time. Finding a bit of support at 1.2610 for the moment as I type .

There's little doubt that we live in strange times and rationale was thrown out the window a long time ago so as we look at trading opportunities to begin the year it's even more important not to over analyze but trade the price action with discipline and patience.

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

Interbank rates: 09.10 GMT

GBPUSD 1.3738

EURUSD 1.2136

EURGBP 0.8834

GBPEUR 1.1320

GBPAUD 1.7697

GBPCAD 1.7345

GBPJPY 142.15

GBPZAR 20.3605

GBPHKD 10.6511

USDJPY 103.46