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  • Mike Paterson

Fragile risk sentiment returns

Thursday 19 May 2022

Another reality check in the past 24 hours which should not surprise any readers here and we've seen equities tumble again with JPY and CHF demand very much to the fore. Gold and oil are tightly bound for the moment amid all the geopolitical and economic uncertainty. I make no apology for my "risk remains fragile" mantra over the past months and hope the steer has helped.

The Pound has had its own reality check with markets seemingly now agreeing with me that it's not all about rate hikes either in UK or elsewhere. There are far bigger pictures to consider as inflation continues to rampage through global economic growth and consumer spending. Still have to be aware of extended moves bringing short-term correction.

I repeat my view that it's still a case of not over-analysing but keeping your focus on price action in core and cross-pairs. We will continue to trade in ever-fickle markets so the need remains to identify ranges and what levels present value for money. Algos will continue to knee-jerk price action on the variable headlines versus natural flows. Discipline is key as ever.

GBPUSD: A retreat into 1.2330 this time helped by GBPJPY and GBPCHF supply but tempered by EURGBP falling back from 0.8500 too. Pips banked and I remain poised to sell rallies but timing as ever is crucial. EURGBP: I warned yesterday "More two-way business to continue as markets/algos over react" and so it has proved with failure into 0.8500 bringing a retreat to 0.8465 as I type. Expect more of the same. GBPJPY: Down down deeper and down again as risk sentiment take another hit/reality check. Holding 158.00 so far but rally sellers will remain poised.

EURUSD: 1.0480 broken again yesterday amid the EURCHF and EURCHF risk-off supply but finding a base into 1.0450 and now challenging 1.0500 again as the jury remains out. USDJPY: Tight range broken amid the softer risk tones and now testing 127.80 after breaking down through 128.30-50 support. Pips banked in the retreat. Option interest notable at 128.50 today.

EURJPY: 134.00 holding so far in the latest retreat but rally sellers remain poised.USDCHF: SNB comments yesterday confirmed continued intervention but equally acknowledged inflation worries and that, along with general risk-off CHF demand was enough to drive the pair lower to test 0.9800 as I type with EURCHF falling ever lower too. SNB not fighting markets for the moment but will never be far away. EURCHF: I warned yesterday "sellers still poised 1.0480-00" and the risk-off/SNB comments double whammy now sees lows of 1.0280 after attempting to hold 1.0350 but SNB powerless to stem the tide for the moment. They will be watching but equally trading off the stronger CHF against inflation hedge.

AUDUSD: Holding 0.6950 in the latest retreat after failing around 0.7030 again amid the AUDJPY supply returning. GBPAUD has 1.7750-70 now capping after testing 1.7650. NZDUSD also soggy still amid softer risk tones. GBPNZD testing support into 1.9500 yet again amid the sell-off this morning. USDCAD: A hold of 1.2820 but failing at 1.2900 amid softer risk tone CADJPY supply and oil making its mind up. Demand into 1.2730-50 where we have large option interest in next 24 hours. Large interest at 1.3000 caps the other end.

Let's continue to be careful out there in all things.

Interbank rates: 08.37 BST

GBPUSD 1.2374

EURUSD 1.0482

EURGBP 0.8470

GBPEUR 1.1803

GBPJPY 158.42

GBPCAD 1.5901

GBPCHF 1.2090

GBPZAR 19.8352

GBPHKD 9.64402

USDJPY 128.00

EURJPY 134.20

EURCHF 1.0300

EURHKD 8.1729

AUDUSD 0.6980

USDCAD 1.2844

USDCHF 0.9823

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