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  • Mike Paterson

Fragile markets still as another week closes

Friday 15 July 2022

A mixed bag on FX pairs still as we head into the weekend. Good two-way business in the past 24 hours but all relative given current levels and recent moves. USD demand overall still. Equities a little firmer but oil and gold still looking soggy.

A lot of focus today will be on BTPs and European bonds as the Italian political chaos plays out. Italian PM Draghi offered to resign after his coalition collapsed after the European session yesterday. The offer was rejected by President Mattarella, if only to to alleviate an immediate political crisis.The offer to resign caused BTP futures to plunge sharply before the close, falling from around 123.50 for September 2022 futures, to 122.34 at close. 10-year spreads on Italy vs German bond yields is currently up over 225 basis points as I type.

Today also sees the latest University of Michigan data and US Retail Sales and markets will be looking for more FOMC clues ahead of the blackout period. Fed’s Bostic discusses mon pol at 12:45 GMT. He endorsed a 75bp hike last week and is unlikely to deviate from his hawkish tone this week.

As always, don't over-analyse but be ready with your preferred levels/strategy, place orders and let the algos do the heavy work. Discipline is key as always but equally hesitation can often ruin a great idea.

GBPUSD: Capping into 1.1850 yesterday and a further retreat to test 1.1760 but bounced back to test and fail again at 1.1850 so far this morning. I remain poised to sell rallies. Timing as ever is crucial.EURGBP: Capped into 0.8500 but demand building around 0.8460 as jury remains out. I still think we'll see two-way pips overall.GBPJPY: Capping above 164.50 but equally finding support at 163.50 as the JPY/risk jury remains out.

EURUSD: A clear break of 0.9980-00 yesterday but found good support at 0.9950 and since capped at 1.0040 on the bounce. Ukraine, Russian gas supplies, ECB, recession remain the focus and now the Italian political fallout.

USDJPY: A good hold of 138.50 since failing into 139.50 as the jury remains out.EURJPY: Support at 138.75 as core pairs find dip demand and risk turns a little firmer but sellers poised still.USDCHF: Support at 0.9800-20 still holding after capping around 0.9850 with EURCHF slipping back. Jury remains out on SNB and amid variable risk but CHF still in demand as further tightening expected.EURCHF: Holding 0.9825 so far in the latest retreat after capping into 0.9880.Some SNB support still I reckon but sellers prevailing again.

AUDUSD: Capping at 0.6760 this time after yesterday's extended retreat to 0.6680 and now finding a decent base at 0.6720 this morning so far. GBPAUD currently trading 1.7500-1.7600 as core pairs range. NZDUSD capping into 0.6140 this time after breaking down to 0.6060 yesterday before bouncing back through 0.6120. GBPNZD bids into 1.9250 holding the latest retreat after a good cap at 1.9450.USDCAD: A solid rally to 1.3220 yesterday on the firmer USD/softer oil double whammy but equally a speedy retreat after. Support at 1.3100 since unsurprising given we have large option interest today.More at 1.3150 and 1.3180 potentially in play too.

Let's continue to be careful out there and have a good weekend everyone.

Interbank rates: 08.45 BST

GBPUSD 1.1830

EURUSD 1.0023

EURGBP 0.8470

GBPEUR 1.1803

GBPJPY 164.27

GBPCAD 1.5521

GBPCHF 1.1608

GBPZAR 20.3425

GBPHKD 9.2156

USDJPY 138.87

EURJPY 139.19

EURCHF 0.9830

EURHKD 7.8098

AUDUSD 0.6726

USDCAD 1.3118

USDCHF 0.9807

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