Another risk-off reality check

Thursday 11 June 2020

Powell & Co on the FOMC kept rates on hold as expected and offered little else in either the statement or presser but we had some good volatility around the event. Powell made it clear that rtes weren't going up anytime soon and they stood prepared to throw more ammunition to keep the economy from collapsing with one eye on the jobs data.

The lack of any further action at this time though has thrown the happy-clappy ultra cheap money party into a but of a reality check and there's been a distinct smell of risk-off fear again in the market as normal service resumes once more. Equities and commodities are turning lower and we've seen JPY and CHF demand return as I've warned for a while and always remained my preferred strategy as you know.

These are ever-fickle markets though so we will take nothing for granted.

GBPUSD had a real roller-coaster ride yesterday, basing around 1.2720 a few times then soaring to 1.2812 post-FOMC and now tested 1.2650 since. Rinse and repeat still the advice for the moment. EURGBP finally broke above 0.8930 to post 0.8973 (GBPEUR down to 1.1143) as the GBP reversal outpaced that of the Euro.GBPJPY capped around 137.40 and looking soggy again as risk-off appetite increases but finding support into 135.30 as I type.

I stay poised to sell GBP rallies overall but patience continues to be a virtue and entry level key as always. I still think we can expect some dip demand though given the recent rally.

USDJPY looks soft still as Yen demand returns amid and now been down further to post 106.89 from 107.33. Demand building at 106.80-85 and holding falls so far .EURJPY has found itself under pressure too on the risk-off plays but support into 121.30 still where we also have large option expiries today.EURUSD had a brieF look above 1.1400 post-FOMC but has retreated since on some EURCHF and EURJPY supply albeit tempered by the EURGBP rally.

USDCHF failed at 0.9500 anmd has fallen through some previous support lines to test 0.9400 as EURCHF also retreated to look at 1.0700 from 1.0800 amid the risk-off sentiment CHF demand. SNB will still look to prop up the dips but seemingly not rushing in atm as I observed yesterday.

AUDUSD had another look above 0.7000 and indeed extended to 0.7060 post-FOMC in that soggy USD moment but now back down to 0.6925 helped by AUDJPY selling and some Chinese retaliation talk again. USDCAD based around 1.3320 and has rallied in steady fashion again to test 1.3500 amid the softer oil/risk sentiment combo.

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

Interbank rates:  08.25 BST

GBPUSD   1.2678

EURUSD   1.1367

EURGBP   0.8964

GBPEUR   1.1154

GBPAUD   1.8293

GBPCAD   1.7089

GBPJPY   135.68

GBPZAR   21.1079

GBPHKD   9.8292

USDJPY   106.98

USDZAR   16.6387

EURJPY   121.60

EURCHF   1.0712

EURHKD   8.8123

AUDUSD   0.6989

USDCAD   1.3478

USDCHF   0.9426