• Mike Paterson

Firmer risk tones prevailing but jury still out

Wednesday 21 July 2021

This morning we've once again seen some recovery in equities and US bond yields so firmer risk tones after yesterday's up and downs. A little USD demand still prevailing generally as European trading gets underway but these current moves are still risk, not USD, driven and right now there some JPY selling underpinning core pairs.

ECB decision and press conference tomorrow casting a shadow. 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.

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 entry/exit levels is more important than ever.

GBPUSD: Failure to get back above 1.3650 after lows around 1.3570 and some re-sells duly placed in the rally per my tweets. Pips banked in the retreat but keeping some core short as a hedge versus USDJPY re-sells. I remain a rally seller while keeping an eye on EURGBP and GBPJPY as always.EURGBP: 0.8670 capping rallies yesterday and now 0.8660 seems a decent line but demand still around 0.8620-30. Euro generally softer this morning.GBPJPY: A good hold of 148.40-50 yesterday as JPY supply returned on steadier risk tones underpinning core pairs and now got 150.00 in its sights again but sellers poised once risk softens.

I remain a GBP rally seller across the pairs but being patient as ever and that's now reaping more rewards. I hope the steer has helped. Risk to the downside still overall.

EURUSD: 1.1760 breaking as I type amid some general EUR weakness and the firmer USD tones. Cross flows very much making an impact still. Options at 1.1700 potentially in play. ECB meeting tomorrow casts a shadow.

USDJPY: 109.60 and then 109.80 now forming a decent support line providing a good platform for highs of 110.15 as I type amid the firmer risk JPY supply.EURJPY: 128.60 held the drop through 128.80 and now testing extended recent highs of 129.60 on the firmer risk tones.USDCHF: 0.9220 broken but not rallying too far at the moment yet now underpinned at 0.9200-10 as EURUSD retreats as EURCHF remains underpinned now at 1.0840 with the SNB ever vigilant.EURCHF: A good hold of 1.0820 so far with SNB shadow/help ever present but rally sellers still poised amid the variable risk tones.

AUDUSD: Holding 0.7290 but rallies still weak above 0.7330 after the RBA reaffiremd no rate hikes til 2024 and reports that they might even be considering increasing QE meanwhile.USDCAD: Holding 1.2675-80 in yesterday's retreat but equally capping now at 1.2730 amid firmer oil/CADJPY demand. Large options at 1.2750 lurking tomorrow and will cast a shadow.

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

Interbank rates: 08.19 BST

GBPUSD 1.3594

EURUSD 1.1758

EURGBP 0.8648

GBPEUR 1.1562

GBPJPY 149.41

GBPCAD 1.7270

GBPZAR 20.0281

GBPHKD 10.5596

USDJPY 109.91

USDZAR 14.7042

EURJPY 129.24

EURCHF 1.0845

EURHKD 9.1306

AUDUSD 0.7292

USDCAD 1.2723

USDCHF 0.9222

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