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Forex Update : US Dollar Index ,Euro ,JPY ,AUD ,GBP ,INR -Anirudh Sethi
Archives of “Forex” category
rssGBP lacks any catalyst for a significant bounce – its likely to fall to 1.25
A client note late last week via Société Générale on their outlook for sterling.
In summary:
- Bank of England gave a strong indication of negative rates coming early 2021, if combined with a no trade deal Brexit could prompt drop for GBP
- GBP is already weaker than relative growth might suggest, or than relative rates might warrant
- GBP continues to lack any kind of catalyst for a significant bounce
- GBP/USD likely to fall 1.25 in Q1 2021
- EUR/GBP to 0.96 in Q1 2021, to 0.94 in 12 months
SG say they favour shorting GBP/JPY
SG note there is support for GPB :
- biggest source of support is that it is already so cheap and sentiment is already so bearish
- as well as the economic and political outlook
CAD/JPY was the biggest FX mover this week
NZD was also strong
The yen was the top performer this week while the kiwi lagged. On its face, that fits in nicely with the ‘risk off’ theme but the old risk on/off paradigm hasn’t applied for a long time. Neck-and-neck with the yen as the top performer was the New Zealand dollar.
Taking a look at CAD/JPY, there isn’t much in the weekly chart. It was the second week of declines but it’s still comfortably within the range since June.
Do note that the pair failed twice at 82.00 and that points to a downside bias.
CFTC commitments of traders: Traders trim some of the EUR longs
Weekly commitments of traders data for the week ending September 15, 2020
- EUR long 179K vs 198K long last week. Longs decreased by 19K
- GBP long 2K vs 13k long last week. Longs decreased by 11K
- JPY long 23K vs 22K long last week. Longs increased by 1K
- CHF long 12K vs 12K long last week. No change in net speculative position
- AUD long 16K vs 2K short last week. Longs increased by 18K
- NZD long 3K vs 5K long last week. Longs decreased by 2K
- CAD short 17k vs 17K short last week. No change in net speculative position
The other big change was in the AUD. The net long position moved up 18K to a net positive positin of 16K from short 2K.
The GBP long moved from 13K to 2K.
USDJPY down for the 5th consecutive day
Sellers push toward July lows but does find some stall
The USDJPY had a 59 pip trading range last week. This week, the non trend has seen a march lower. The pair is down for the 5th day in a row today. The range is 188 pips.
Looking at the hourly chart, the pair did try to extend above a topside channel trend line in the Asian session but did run into a swing area from Wednesday and Thursday (see red numbered circles) and rotated back to the downside. The pair moved below the low from yesterday at 104.516. That is now close risk for shorts, as is the old trend line at 104.57 (see chart above). Stay below keeps the sellers firmly in control. A move above would muddy the intraday waters a bit technically.
Drilling to the daily chart, the price low today reached 104.267. That got within 8-9 pips of the swing low from July at 104.18. A move below that level would take the pair to the lowest level since March 12. The level did attract some early buyers as risk could be defined and limited.
EURUSD has large option up at 1.1900
Option
- €1 billion apx option level up at 1.1900
Nearly 100% call (buy) bias on this option. Would favour a small pop up into this level
DXY pulls back from FOMC inspired highs
Daily pivot point below
The daily pivot point is just above the 93.00 level. Remains to be seen whether buyers will buy this dip as the FOMC disapointed, but they didn’t deviate from their ultra low rate mandate. They also want to see jobs stabilise AND inflation at 2.0% before hiking. That looks a very long road at this stage.
EURUSD finding support at daily trendline
EURUSD
EURUSD finding support at daily trendline. It will need to break through lower to open up a potentially larger medium term move lower in the EURUSD.
Mirror reverse in the Dollar Index as you would expect
The Chinese yuan reached its best level against the U.S. dollar since May 2019, which has “single-handedly supported global risk sentiment and kept a lid on the dollar:”
The pound continues to struggle to get off the floor
Cable is lingering at session lows just below 1.2800 currently
GBP/USD is down to a session low of 1.2785 as the pound is struggling to for respite amid the ongoing Brexit uncertainty seen throughout the week.The pair is sitting lower despite the fact that the dollar is seen weaker for the most part against other major currencies, barring the Japanese yen.
For cable, key support levels are continuing to give way and things aren’t looking pretty:
The drop yesterday took out the 50.0 retracement level @ 1.2867 and that is shifting the downside focus towards the 200-day MA (blue line) @ 1.2737 currently.
That alongside the 100-day MA (red line) @ 1.2694 (and 61.8 retracement level @ 1.2722) will be the key focus areas in case the downside momentum extends. A break below that will see sellers build even more pressure in search for a move towards 1.2500 next.
On the week, the pound has been the runaway underperformer as it is down by 3.7% against the dollar. The next weakest currency has been the Canadian dollar, which has been weighed down by slumping oil prices, and the loonie is “only” down 0.9%.