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  • Mike Paterson

Firmer risk sentiment still prevailing

22 July 2021

We've once again seen recovery in equities, oil and US bond yields so firmer risk tones and a stronger Pound helped by the GBPJPY demand but a mixed bag in USD generally as these current moves are still risk, not USD, driven.

BOE's Dep Gov Broadbent just out saying inflation is oil price led and unexpected but temporary. Blah, blah. Another CB speaker blowing in the wind.GBP slighlty lower again on the headlines but risk-on dip buyers still poised.

Talking of which the ECB decision and press conference today very much in play as we see further EUR weakness prior. Not expecting any change in rates but Lagarde will no doubt be called to comment on the recent inflation target shift in excess of 2% plus her references to forward guidance being revisited. In this week of hype and fragility we could see the algos have some fun so be prepared with your preferred trading entry/exit levels.

Patience and discipline in trading are key as ever and not being greedy even with some greater levels of intra-day volatility returning. Still some good two-way pips to be had amid the mayhem so picking your moment and levels is more important than ever.

GBPUSD: A good hold just below 1.3600 twice set the tone for an eventual break of 1.3650 then 1.3680 then the key 1.3700 area. A hold of 1.3680 in the subsequent retreat has seen a test of 1.3750-60 as GBPJPY demand and EURGBP selling help the latest GBP love-fest. I remain a rally seller while keeping an eye on EURGBP and GBPJPY as always.

EURGBP: 0.8660 duly created a decenbt resistance line as I warned here yesterday and the general GBP demand/EUR supply double-whammy has seen a solid retreat to test the good support around 0.8580.ECB decision and rhetoric definitely in focus.GBPJPY: 150.00 resistance broken and provided a decent base then 150.50 and now 151.00 as the pair rallied to 151.50 amid the risk-on tones. Sellers poised once risk softens in these ever fickle times

I remain a GBP rally seller across the pairs but being patient as ever. These are risk sentiment markets and ever fickle so good/tight position management essential.

EURUSD: 1.1760 holding again then 1.1780 but notable failures above 1.1800 as ECB looms. Cross flows very much making an impact still to keep the range contained. Now let's see what Lagarde has to say and fire up the algos

USDJPY: 110.00 now forming a decent support line amid the firmer-risk JPY supply.EURJPY: 129.60 providing the platform now but failure at an old resistance line of 130.20 so far as we wait on ECB.

USDCHF: 0.9220-30 failing again EURUSD rallied from 1.1760-80 with EURCHF falling back too but with the SNB ever vigilant.EURCHF: A good hold of 1.0810 this time with SNB shadow/help ever present after rally sellers prevailing at 1.0840

AUDUSD: A decent rally after holding 0.7280-00 helped by the AUDJPY demand and testing 0.7375 now where we have large options today as I've warned all week. No coincidence. USDCAD: Capping now at 1.2600-20 after the solid retreat to 1.2520 from 1.2680 amid firmer oil/CADJPY demand. Large options at 1.2750 now out of play unless we get another big risk-off day.

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

Interbank rates: 08.50 BST

GBPUSD 1.3745

EURUSD 1.1785

EURGBP 0.8880

GBPEUR 1.1656

GBPJPY 151.52

GBPZAR 19.9844

GBPHKD 10.6565

USDJPY 110.30

USDZAR 14.5542

EURJPY 129.98

EURCHF 1.0825

EURHKD 9.1425

AUDUSD 0.7365

USDCAD 1.2575

USDCHF 0.9189

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