Month-end flows notable with some risk-off sentiment returning too
Friday 29 May 2020
Yesterday I warned about month-end USD supply particularly in GBP and EUR and also warned sbout some front running. Well, we've seen that with the Greenback falling across the board and we can expect more of the same into the 4pm London fix later.Final estimates of month-end hedge rebalancing flows continues to call for USD selling against all major currencies with AUD,CAD and NOK now highlighted too but less notable vs JPY.
Meanwhile US-China tensions continue to weigh on risk sentiment with Trump expected to make an announcement on the situation later today. Forewarned is forearmed and I've been highlighting fragile risk for a while which is also sending USDJPY lower on the Yen demand so I hope the steer has served you well.
GBPUSD failed at 1.2280 a couple of times then fell to test the 1.2220-25 bids on some negative news but that was the opportunity to buy back particularly with the month-end demand. The rally from there broke the back of the 1.2280-85 offers and that was another signal not to stand in the way as we tested the larger 1.2350-55 resistance. Re-sells duly placed but still some dip demand to be expected on month-end flows but good two-way pips to be had again meanwhile with EURGBP demand also helping to cap.EURGBP duly held 0.8960 where I noted bids building yesterday and helped by the month-end demand and EURUSD outstripping GBPUSD on the core pair rallies to help the pair up to 0.9048 (GBPEUR down to 1.1051) this morning.GBPJPY failed yet again into 133.00 and falling to 132.00 as I type as risk-off selling dominates the landscape and highlighting the Pound's inherent softness.
I stay poised to sell GBP rallies overall and buy back in the dips as ever but patience continues to be a virtue and entry level key as always. Caution advised as we head into month-end flows still.
USDJPY duly failed into 107.90 where we had large option expiries and now testing 107.00 on the general USD supply and fragile risk. EURJPY rallied on yesterday's general EUR demand/better risk combo before finding more sellers above 119.30 but decent dip demand since into 118.80. EURUSD had a bid all day and duly accelerated through 1.1080 helped by those stops at 1.1055-65 I higlighted and all on the month-end flows you were warned about and we should expect more today. USDCHF is holding 0.9600 for the moment again as EURCHF breaches 1.0700 on the EUR demand generally with no doubt a little helped from the SNB.
AUDUSD has enjoyed the month-end USD supply but good two-way business still with China casting its ugly shadow while USDCAD has been contained amid the variable softer USD but also the lower oil and softer risk combo providing some CAD supply.
Let's continue to be careful out there in all things. Staying safe must be our main priority still. Make sure you get some rest over the week-end.
Interbank rates: 08.45 BST