Mixed risk tones prevailing again
Thursday 20 October 2022
Reports overnight that Chinese officials are debating a cut to inbound Covid quarantine restrictions saw some better risk appetite return and we've seen equities rally albeit off their highs and retreating a little as European trading gets underway. USDJPY has traded briefly above 150 for the first time since 1990 before paring some gains but still looks underpinned as does the Greenback overall as US treasury yields climb higher again.
Oil prices have risen amid some better risk and with Biden announcing the sale of 15m barrels as expected and seemingly putting a bid in at $70-72 for future purchases. Meanwhile the UK political debacle continues with a change of Home Secretary and rumours doing the rounds that PM Truss will be lucky to survive the day. The Pound remains vulnerable as, let's face it, there's hardly a plethora of suitable candidates to replace her or others in the government.
GBPUSD: A cap in place at 1.1280 yesterday and now 1.1250 amid the UK political/economic uncertainty and firmer USD to test 1.1180. I remain a rally seller. I still can't see any good news to be had from the current fallout. EURGBP: Finding support at 0.8700 and now through 0.8730 again to post 0.8742 amid the general GBP supply. I still expect some two-way business with the Eurozone facing issues of its own but the UK definitely still the main focus. GBPJPY: 168.00 support now broken after capping at 168.50 amid the GBP supply and with USDJPY still vulnerable to MOF intervention rumour/action but should still find some two-way pips on the underpinned USDJPY tones overall
EURUSD: Support now 0.9760 after capping around 0.9800. I remain a rally seller as my preferred side. Cross flows, risk, Ukraine and ECB conjecture all in the frame still as well as USD flows. Decent option interest today/tomorrow too. USDJPY: Still marching ever-higher to 150.10 this morning. Intervention threat still real though but...... EURJPY: Still capping into 147.00 but holding 146.50 again. JPY the driver still overall. USDCHF: Still climbing higher amid the general USD demand with support now at 1.0030 as EURCHF remains underpinned for the moment with SNB never far away albeit off 0.9825 highs. Option interest at 1.0000 should we dip. EURCHF: Holding the old resistance of 0.9820-30 now with seemingly some SNB smoothing still and EUR dip demand but sellers poised.
AUDUSD: Support now around 0.6230 helped by the more positive China Covid news after the drop through previous line at 0.6280 which now becomes immediate resistance. NZDUSD holding 0.5625 in latest retreat but with sellers now poised at 0.5680-00. USDCAD: Holding of 1.3740 this time general USD demand and oil rally fading but sellers poised 1.3780-00. Variable CADJPY flows still impacting too. I expect two-way business overall still amid the fickle oil and risk variables.
Interbank rates: 08.28 BST