Markets making their mind up still
Friday 24th June 2022
Yet another risk and USD rollercoaster ride in the past 24 hours with US bond yields falling heavily undermining the Greenback and equity markets. Some recovery since but it remains a very fragile landscape out there. Similar story for gold and oil price although the latter looks particularly soft again. All relative of course but commodity currencies taking a hit with softer metal prices too.
Fed Chair Powell yesterday repeated that achieving a soft landing is becoming increasingly more challenging and given his focus on economic data the soggy US PMI release will give him some further cause for concern. Markets now starting to focus attention on economic weakness vs inflation threat globally. Soggy German IFO data just out.
The UK Tory government lost the two by-elections in dramatic turnarounds in a protest vote that has resulted in the resignation of the Party Chairman but Johnson refuses to concede his own position. The Pound will remain vulnerable to the political uncertainty but so far has shown little reaction given that mid-term by-election protest results are the norm with low turnouts.This morning's soggy UK Retail Sales data adding to the gloom though.
As ever, deal on fact not second-guessing. 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: A good hold of 1.2175-80 yesterday making my buy-backs down there prudent and eventually burst up through 1.2225 again before failing into 1.2300. I had learned my lesson from Wednesday and so didn't rush in but re-sells eVentually placed above 1.2280. Some pips banked into the 1.2250 retreat but keeping core shorts and remain poised to sell rallies. Timing as ever is crucial.Pstience and discipline have indeed been a virtue on this one yet again.EURGBP: Capping at 0.8600 but holding 0.8570 as jury remains out and plenty of second-guessing the ECB and BOE still.GBPJPY: 165.75 the new cap and testing 165.00 again in the latest retreat which has dragging core pairs lower too. I think the variable risk tones will help to keep contained still but has room to go lower overall.
EURUSD: Capped into 1.0560 and now testing 1.0520 again and have banked a few pips from re-sells. Option interest at 1.0500 again today. USDJPY: Finding support into 134.30 again this morning after a good hold yesterday and subsequent rally to test 135.25 and some pips banked again from re-sells per my tweet this morning. Dip demand still expected for the moment.EURJPY: That base at 142.00 now history amid the softer risk tones and some general EUR supply again but holding 141.40-50 so far. Rally sellers poised still when sentiment turns softer.USDCHF: 0.9600 broken but fresh support coming in at 0.9560 and now 0.9630 in the USD-led rally but jury remains out on SNB and amid variable risk.EURCHF: That 1.0130 support line proved short-lived yesterday amid some renewed CHF demand/EUR supply softer risk double whammy but holding 1.0060 and back up through 1.0130 still as USDCHF rallies amid some firmer better risk tones. Sellers will remain poised.
AUDUSD: Capping at 0.6920 and now back below 0.6900 again helped by some earlier AUDJPY supply and softer iron ore price. Commodity currencies generally underp ressure still. GBPAUD holding 1.7750 for the moment after capping at 1.7800 again. NZDUSD on the back foot again after capping at 0.6310 amid some general USD demand and commodity ccy supply. GBPNZD finding support at 1.9450 still but capping at 1.9500 in the bounce so far.USDCAD: Supported at 1.2975 as I type after capping at 1.3020 then 1.3000. Some CADJPY supply and softer oil helping to underpin once again.
Let's continue to be careful out there and have a top weekend.
Interbank rates: 08.00 BST