Pepperstone logo
Pepperstone logo
  • English (UK)
  • Ways to trade

    Pricing

    Trading accounts

    Trading hours

    24-hour trading

    Spread betting vs CFDs

    Maintenance

  • Trading platforms

    Trading platforms

    TradingView

    MetaTrader 5

    MetaTrader 4

    Pepperstone platform

    cTrader

    Trading integrations

    Trading tools

  • Markets

    Markets to trade

    Forex

    Shares

    Indices

    Commodities

    Currency Indices

    Dividends for Index CFDs

    Dividends for Share CFDs

    CFD Forwards

    ETFs

  • Market analysis

    Market news

    Navigating Markets

    The Daily Fix

    Meet the Analysts

  • Learn to trade

    Trading guides

    CFD trading

    Spread betting

    Forex trading

    Commodity trading

    Stock trading

    Technical analysis`

    Day trading

    Scalping trading

    Candlestick patterns

    Upcoming IPOs

    Gold trading

    Oil trading

    Webinars

  • Partners

  • About us

  • Help and support

  • Professional

  • English (UK)
USD

The USD takes flight - arise King USD

Chris Weston
Chris Weston
Head of Research
29 Sept 2021
Share
King USD is in the house and it doesn’t matter the currency, just buy USDs has been the vibe.

the USD has found its form and this one-way movement is the flow of capital aggregating to promote a rampant bull trend – Hedge funds and CTAs (Commodity Trading Advisors – trend followers) would be all over this move, and anyone who subscribes to buying strong and sell higher – Momentum is the strategy here and we’re seeing the biggest one-day gain in the USD since the June FOMC meeting, with the biggest percentage moves vs high beta FX (NZD, MXN, NOK).

The question for intra-day traders is can momentum morph more into a short-term mean reversion play? Or, can we run both concurrently?

EURUSD daily

30_09_2021_D1.png

(Source: Tradingview - Past performance is not indicative of future performance)

EURUSD has broken 1.1600 and trades the lowest levels since July 2020 – what’s interesting is the 1.1900 double top neckline (1.1663) has now been taken out and this targets 1.1420. One could take the timeframe out and see an even larger double top in play that argues for 1.1100 – that’s a big move and it won’t happen overnight, if at all. The USDX (USD index) has taken flight, as one would imagine given the EUR commands a 57% of this basket - we’ve seen the USDX smash the 20 August high and the 94 figure.

Options traders are buying downside volatility and the premium for 1-week or 1-month put EURUSD volatility has ramped vs calls – it tells a lot about sentiment. US Treasury bonds are largely unchanged on the day, but USD real (inflation-adjusted) yields have been risen 27bp vs German real 10-yr bunds through September, and this is putting real tailwinds into the USD.

USDJPY has broken the double top at 111.68 and is pushing the 112 figure – the Feb 2020 spike high of 112.22 offers the bears some hope that better supply may be seen into here – everyone is shouting, “grossly overbought”, a situation of client base are sympathetic to, with a sizeable 87% of all open positions in USDJPY now held short in this pair.

30_09_2021_D2.png

(Source: Pepperstone - Past performance is not indicative of future performance)

GBPUSD has been given a solid workout, with 1.3400 in its sights. However, the net result now is our clients are all in on the counter-rally, with 81% of open positions now held long.

30_09_2021_D3.png

(Source: Citi - Past performance is not indicative of future performance)

Flow and technicals aside, fundamentally, we’re effectively seeing both the left and right side of the USD ‘smile’ theory’ working in earnest (see above) – On the left side we’ve got stagflation concerns rising in markets – let’s call it ‘stagflation lite’ for now, but the moves in commodities have not been driven so much by the perception of demand. However, by supply-side constraints, which is not overly risk positive – either way we’ve seen some a modest lift in inflation expectations, while growth remains in question.

On the right side and while we’ve seen other central banks talking about normalisation of policy – notably from the Norges Bank and BoE – it’s the Fed that is the price maker and when they’ve made it clear they will taper in November, and the market sees a connection between tapering and rate hikes, which are priced to start lift-off in December 2022.

Some are talking about month and quarter-end flows and maybe there is some truth to that. But it’s hard to quantify. USDCNH has moved modestly higher and while EM FX hardly seeing a vol move, we're seeing sellers and traders are rolling out of higher carry EM currencies.

The wash-up for me is it’s clearly hard to chase the move in the USD from here, unless you’re governed by rules (systematic) and it seems logical to consider the intra-day mean reversion play. We may see USD longs covering through Asia, but the preference here is to stay with the USD flow for now, at least into the new quarter and short-term look to reload EURUSD shorts into 1.1640/50 and USDJPY longs into 111.50/60.


Related articles

The worries of the market: a time to de-risk

The worries of the market: a time to de-risk

US500
USD
US Q3 earnings - trade a new level of flexibility and control

US Q3 earnings - trade a new level of flexibility and control

US500
Apple
Tesla

Most read

1

The disinflationary message seen in commodities and rates markets

2

Will the BOJ be the last dovish domino to fall?

3

Trader thoughts - the conflicting forces dictating EURUSD flow

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

Get startedSubscribe to The Daily Fix

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other Sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Trading hours

Platforms

  • Trading Platforms
  • Trading tools

Markets and Symbols

  • Forex
  • Shares
  • ETFs
  • Indicies
  • Commodities
  • Currency indicies
  • CFD forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Pepperstone pulse
  • Meet Our Analysts

Learn-to-trade

  • Trading guides
  • Videos
  • Webinars
Pepperstone logo
support@pepperstone.com
+442038074724
70 Gracechurch St
London EC3V 0HR
United Kingdom
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy

© 2025 Pepperstone Limited 
Company Number 08965105 | Financial Conduct Authority Firm Registration Number 684312

Risk warning: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74.8% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Trading derivatives is risky. It isn't suitable for everyone and, in the case of Professional clients, you could lose substantially more than your initial investment. You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your or your client's personal objectives, financial circumstances, or needs. Please read our legal documents and ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice.

Pepperstone Limited is a limited company registered in England & Wales under Company Number 08965105 and is authorised and regulated by the Financial Conduct Authority (Registration Number 684312). Registered office: 70 Gracechurch Street, London EC3V 0HR, United Kingdom.

The information on this site is not intended for residents of Belgium or the United States, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.