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  • Writer's pictureMike Paterson

Euro in focus after proposed EU Recovery Fund

Tuesday 19 May 2020

Move over doom and gloom there's a new slice of wild optimism in town again as equities remain firm but now we have the EUR 500bln EU recovery Fund proposed by Germany and France yesterday to add to the current feel-good factor.

Cue Euro gains helped by the better risk sentiment generally which has seen EURCHF zoom up to 1.0660 no doubt given a helping hand by the SNB which has helped underpin EURUSD at 1.0900 while EURJPY rallies to 117.66 and EURGBP finding dip demand despite decent supply above 0.8950.

I warned yesterday that caution was advised on GBP after the recent falls and yesterday saw GBPUSD hold 1.2100 early on in European trading after capping at 1.2120-25 again and that was a good enough signal amid the risk-on GBPJPY demand to keep a bid under the pair all day as it took out 1.2150 then 1.2180-00 to test 1.2220-30. Since then we found a cap at 1.2200 but that broke and markets took some joy from theis morning's UK jobs/wages data and we've been up to look at 1.2260 in a rush before retreating but still underpinned for the moment.

EURGBP headed back up on the EUR rally to test 0.8960 but failed and that helped underpin Cable as per my tweet. Support at 0.8930 was broken post -UK data but dip buyers prevailing for the moment. Jury out though.GBPJPY found support at 129.80 and then 130.60 then 130.80 as the climb higher gained traction on the better risk sentiment but sellers prevailing above 1.3160 for the moment.

I stay poised to sell GBP rallies overall and buy back in the dips as ever but patience continues to be a virtue and entry level key as always.Caution still advised but sellers not getting shaken off just yet amid the Brexit/negative rates back-story.

USDJPY duly capped at 107.50 with large option expiries playing out but demand at 107.25-30 still holding the retreats helped by the risk-on Yen selling. EURJPY held 115.350 support but failed into 116.20 again as we stay tightly ranged. EURUSD also had a bid in all day after holding 1.0800 then 1.0820 then breaking up through 1.0850 before the Merkel announcement sent it up to test 1.0900 before finally breaking and its been underpinned there since. Lots to consider re that package which has already run into a points of contention and will have to be agreed by all 27 EU members but for the moment its happy-clappy time again although I'm ever sceptical.

USDCHF found support at 0.9680 then 0.9700 and then rallied to test 0.9760 as EURUSD rallied with EURCHF surging to look at 1.0660 with the SNB making the most to drive both pairs higher.

AUDUSD held 0.6500 yesteday on those large expiries but has made the most of the better risk sentiment since to post 0.6565 helped by AUDJPY demand tempering the EURAUD buying and shrugging off the Chinese backstory for the moment. USDCAD failed at 1.4080 and has tumbled to 1.3900 amid the generally softer USD and better risk sentiment providing CADJPY and CADCHF demand and firmer oil prices.

You don't need me to tell you that there's lots going on right now, and the foreseeable future, so don't forget to take advantage of my 1-2-1 mentoring sessions if there's areas of trading these volatile markets or how to make best use of the order boards and expiries, that you might need some further help with.

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

Interbank rates:  08.45 BST

GBPUSD   1.2237

EURUSD   1.0935

EURGBP   0.8935

GBPEUR   1.1194

GBPAUD   1.8691

GBPCAD   1.7047

GBPJPY   131.44

GBPZAR   22.3314

GBPHKD   9.4874

USDJPY   107.43

USDZAR   18.2502

EURJPY   117.39

EURCHF   1.0626

EURHKD   8.4754

AUDUSD   0.6546

USDCAD   1.3934

USDCHF   0.9724

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