FOREX: GBP Underperforming as DXY Probes Recovery Highs
Sep-19 08:30
- The dollar is trading on a firm footing Friday, broadly consolidating the solid post-Fed recovery and probing yesterday’s high in current trade around 97.60. Most of the action has been in the Japanese yen following the Bank of Japan, however, it’s sterling that is under the most pressure, after the latest round of UK PSNB data underscored the fiscal challenge that the UK faces at present.
- For USDJPY, the initial reaction was lower following BOJ board members Naoki Tamura and Hajime Takata wanting to raise the policy rate to 0.75%. The hawkish dissents saw USDJPY fall to a session low of 147.20. However, with the BOJ overall keeping its cautious economic view, leaving largely unchanged its assessment of private consumption, capital investment and exports, those initial USDJPY declines were pared steadily throughout the late APAC session and into the press conference.
- A bullish candle pattern on Tuesday - a hammer formation - provided an early reversal signal. Immediate resistance is at yesterday’s high of 148.27, and a continuation higher would open 149.14, the Sep 3 high.
- GBPUSD sits 0.52% in the red on Friday and has broken back below the 1.35 mark. Recent developments show no shift in the UK’s mix of sticky inflation and fiscal worry, resulting in the potential for higher for longer interest rates in the eyes of the market, yet providing no support for the pound.
- Initial firm support to watch at 1.3495, the 50-day EMA, has been pierced. A sustained break would pull into question the recent bullish theme. In similar vein, EURGBP is back above 0.8700, keeping bullish conditions intact. For bulls, a stronger resumption of gains would open 0.8744, the Aug 7 high. Key resistance and the bull trigger is at 0.8769, the Jul 28 high.
- Canadian retail sales is the final data release for the week.
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Historical bullets
BTP: Block trade
Aug-20 08:23
BTP Block trade, suggest unconfirmed seller:
- IKU5 ~1.29k at 120.40.
FOREX: FX OPTION EXPIRY
Aug-20 08:15
Of note:
EURUSD 1.14bn at 1.1675.
USDJPY ~1bn at 148.00.
EURUSD 1.58bn at 1.1700 (thu).
USDJPY 1.42bn at 147.90 (fri).
EURUSD 1.06bn at 1.1650 (mon).
- EURUSD; 1.1600 (853mln), 1.1650 (594mln), 1.1675 (1.14bn), 1.1700 (250mln).
- GBPUSD: 1.3500 (300mln).
- USDJPY: 148.00 (991mln).
- AUDNZD: 1.1000 (741mln).
ESM ISSUANCE: RFP Issued
Aug-20 08:07
“Today ESM, the European Stability Mechanism has sent a Request for Proposal to a selection of banks from the EFSF/ESM Market Group with regards to an upcoming transaction, subject to market conditions.”
- This likely means a transaction on Monday / Tuesday next week.
- We had flagged an ESM/EFSF transaction as likely in late August (although we thought EFSF was more likely).
