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  • Mike Paterson

Greenback feeling the heat still but jury remains out.

Friday 27 March 2022

More of the same as we close another week with lower US treasury yields bringing more USD supply as markets seemingly now have no Fed rate hike surprises factored in. Some better risk sentiment helping to produce some JPY and CHF supply this time and helping to support core pairs too. Equities are underpinned but off their highs as are gold and oil.

More comments by Kuroda and PM Kishida on JPY moves have made little impression as Japan's inflation data comes in lower than expected.The initial estimates of month-end FX hedge rebalancing flows point to moderate USD demand vs all major currencies. The signal strength is broadly in line with the historicalsm. Keep in mind today into the 4pm London fix as markets deal month-end Spot date.

Algos will continue to knee-jerk price action on the variable headlines versus natural flows. Discipline is key as ever.

GBPUSD: One-month highs of 1.2667 amid the softer USD and firmer risk GBPJPY demand after 1.2575 held the latest fall. I remain poised to sell rallies but timing as ever is crucial. EURGBP: Capped at 0.8530 this time and once again in retreat into 0.8500 helping to put a bid under GBPUSD. Good demand down here. More two-way expected. GBPJPY: Holding 159.50 and posting 160.50 amid some firmer risk but sellers poised still as the uncertainty continues.

EURUSD: Found a base at 1.0700 and posting 1-month highs of its own at 1.0765. I remain a rally seller as my preferred side overall but not expecting big retreats for the moment.Lots of option interest today to keep in mind still.

USDJPY: 126.50 still providing good support helped by some GBPJPY demand and softer inflation data but capped around 127.00 with good size options in play today.EURJPY: Now capping at 136.35 but equally supported around 136.00 amid all the uncertainty.USDCHF: 0.9600 now forming a cap amid softer USD but with SNB shadow still lurking in the dips despite their recent change in narrative but equally rally sellers poised too still as I've been warning.EURCHF: 1.0275 support line for the moment and 1.0300 being tested again as I type . SNB watching still but rally sellers continue to lurk.

AUDUSD: Now finding a base at 0.7100 but capping into 0.7150 now. GBPAUD still holding 1.7700 and capping into 1.7800. Bids into 1.7700-30. Sellers 1.7750-80 still and 1.7800-20. NZDUSD breaching 0.6500 but finding 0.6525 a step too far. Now bid into 0.6475. GBPNZD finding support at 1.9400 this time after capping into 1.9500 as NZDUSD finds dip demand still. USDCAD: 1.2800 support broken now with those large options out of the way and testing old 1.2750 support line again amid some CADJPY demand and firmer oil tones. Options in play again today.

Let's continue to be careful out there.

Interbank rates: 06.40 BST

GBPUSD 1.2650

EURUSD 1.0753

EURGBP 0.8500

GBPEUR 1.1763

GBPJPY 160.35

GBPCAD 1.6130

GBPCHF 1.2105

GBPZAR 19.8101

GBPHKD 9.8388

USDJPY 126.75

EURJPY 136.30

EURCHF 1.0296

EURHKD 8.3635

AUDUSD 0.7140

USDCAD 1.2747

USDCHF 0.9575

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