Fragile risk sentiment prevailing again.
Tuesday 2 August 2022
All eyes on Taiwan today as US House Speaker Pelosi’s widely reported trip has raised tensions with China that I warned about yesterday. Chinese stocks have fallen and sent JPY and treasuries higher. Pelosi is expected to arrive at 14:20 GMT and China has vowed an unspecified military response if she does arrive with a visit to the Taiwan parliament planned for tomorrow morning. Dangerous times and sadly one that supports my long-held view, and trading strategy, that we live in a very fragile world.
Softer risk sentiment this morning obviously with equity markets in retreat again after yesterday's solid rally. JPY demand notable amid another Asian USDJPY tumble to 130.40 after breaking down through key 131.50 support sending cross and core pairs lower. Gold is still underpinned while oil is off its lows after yesterday's fall.
The Reserve Bank of Australia duly raised interest rates by 0.5% as expected but produced dovish/cautious tones in their assessment and AUD has tumbled, helped by the risk-off AUDJPY supply.
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 1.2300 yesterday and now back testing 1.2200 helped by the GBPJPY risk-off supply. I will stand poised for rally resells but patience a virtue still. EURGBP: Some EUR dip dafter a look below 0.8350 lows amid the general EUR supply but failure into 0.8400 on the rally so far. I still think we'll see two-way pips jobbing opportunity.GBPJPY: Breaking 161.00 to test 159.50 in the extended retreat with USDJPY once again leading the way but the softer risk supply this morning adding pressure.
EURUSD: Support still at 1.0200 after a decent rally to test 1.0300 yesterday. I still see it lower overall.USDJPY: Capping at 132.50 then 132.00 with rally-sellers prevailing and another sharp fall in Asia amid the thinner liquidity and risk-off JPY demand to test strong support at 130.25 after breaking the key 131.50 level. EURJPY: Capping at previous support of 135.15 this time and a steady retreat to 133.63 before finding some support again this morning. Sellers poised still whenever risk turns and/or reality checks back into town as I've been warning. USDCHF: We've had failure now at 0.9540 amid the general risk-off retreat but support at 0.9470 this morning with SNB keeping an eye on things seemingly as EURCHF finding decent support too.EURCHF: A hold of 0.9700-20 still where I've warned SNB have been watching/smoothing and another rally since to look at 0.9750-60 again but sellers poised amid the risk-off sentiment.
AUDUSD: A good cap around 0.7040 again and now testing recent 0.6920 support after the RBS's dovish/cautious tones and helped by the softer risk AUDJPY supply. GBPAUD holding the previous resistance at 1.7450-60 and a strong rally to 1.7615 so far amid the AUD sell-off. NZDUSD also seeing a fall from 0.6340 and looking at 0.6275 as I type helped by the soggy risk tones. GBPNZD holding 1.9340 and testing 1.9420 again so still tightly bound. USDCAD: Capping at 1.2880 after a strong rally from 1.2800 amid softer oil price and CADJPY risk-off supply.
Let's continue to be careful out there.
Interbank rates: 08.42 BST