FOREX: USDJPY Selloff Well Supported Post BOJ, GBP Underperforms
Sep-19 10:45
- The dollar index trades in positive territory Friday, rising around 0.2% on the session. Broadly, the index is consolidating the solid post-Fed recovery, holding 1.4% above this week’s cycle lows. Japanese yen volatility has been notable on the session following the Bank of Japan, however, it’s GBP that is under particular pressure, after the latest round of UK PSNB data underscored the fiscal challenge that the UK faces at present.
- USDJPY traded around 80 pips lower following the BOJ’s relatively hawkish hold, as board members Naoki Tamura and Hajime Takata dissented and wanted to raise the policy rate to 0.75%. USDJPY fell 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.
- The pair has since consolidated just below the 148 mark. Optimistic sentiment for the pair has been assisted by a bullish candle pattern on Wednesday - a hammer formation - providing 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 0.38% in the red on Friday after briefly piercing 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, but providing a negative impact on the pound.
- Initial firm support to watch at 1.3495, the 50-day EMA, has been pierced. A sustained break would threaten the recent bullish theme. In similar vein, EURGBP is back above 0.8700, keeping bullish conditions intact for the cross. 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 data for July provides the final data release for the week.
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SONIA: Calendar spreads are dominating the flows
Aug-20 10:37
Dominating flow in the Sonia strip, not too surprisingly has been in Flatenners following the touch higher UK Inflation.
Aside from the 11k SFIU5Z5 spread that has traded in 11.8k, pushing back Rate cut bets.
- SFIZ5/H6 has traded in 31k spread to the downside.
- SFIZ5/M6 in 22k also to the sell side.
- SFIZ5/Z6 has traded in 51.1k lots, mostly to the sell side.
The SFIZ5/H6, SFIZ5/M6 have seen their largest single moves since the US NFP, but for the SFIZ5/Z6, this the most notable single move since 8th May.
OUTLOOK: Price Signal Summary - GBPUSD Bull Cycle Still In Play
Aug-20 10:36
- In FX, a consolidation mode dominates for now in EURUSD. The trend set up however, remains bullish. A resumption of gains would expose key resistance and the bull trigger at 1.1829, the Jul 1 high. Clearance of this level would resume the uptrend. Support to watch lies at 1.1588, the 50-day EMA. Major support rests at 1.1392, the Aug 1 low.
- The latest pullback in GBPUSD for now, appears corrective and a bullish condition remains intact. Recent gains resulted in a breach of resistance at 1.3589, the Jul 24 high. This signals scope for a climb towards 1.3636, the 76.4% retracement of the bear leg between Jul 1 and Aug 1. Initial firm support to watch is 1.3449, the 50-day EMA. A clear break of it would signal a possible reversal.
- USDJPY remains in consolidation mode. A bearish threat is present as the pair trades closer to its recent lows. Sights are on support at 145.86, the Jul 24 low. Clearance of this level would highlight a stronger S/T reversal and strengthen the bearish engulfing signal on Aug 1. This would open 144.69, a trendline drawn from the Apr 22 low. Initial firm resistance to watch is 148.52, the Aug 12 high.
OPTIONS: Larger FX Option Pipeline
Aug-20 10:35
- EUR/USD: Aug21 $1.1600(E1.3bln), $1.1700(E1.6bln), $1.1750(E2.0bln), $1.1800(E3.0bln); Aug25 $1.1640-55(E2.0bln)
- USD/JPY: Aug21 Y145.95-00($1.2bln), Y146.70-80($1.8bln); Aug22 Y147.90($1.4bln)
- AUD/USD: Aug21 $0.6590-00(A$1.8bln); Aug25 $0.6510-25(A$1.1bln)
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