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  • Mike Paterson

More of the same

Thursday 26 May 2022

Not a lot of note to report as we see a continuation of second-guessing on CB rate hikes and surging inflation impact. Lower US treasury yields brings more USD supply but equally some fragile risk sentiment helping to produce some JPY and CHF demand and help cap core pairs.

Comments by BOJ's Kuroda on easy mon pol exit and PM Kishida on JPY moves has put the skids under USDJPY and cross pairs this morning. Russia cut its key interest rate by 3% to 11% with a promise of more to come. Rouble unfazed and continues to look strong after the earlier weakness this year in the wake of sanctions.

As ever, 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: 1.2550 holding the latest fall after a decent rally back above 1.2600 and some pips banked from re-sells per my ongoing strategy. I remain poised to sell rallies but timing as ever is crucial. EURGBP: Capped at 0.8550-55 and once again in retreat into 0.8500 helping to put a bid under GBPUSD. Good demand down here. More two-way expected.GBPJPY: Capped at 161.00 after yesterday's strong rally and now down through 159.50 again but still expect demand into 158.50-75 as the uncertainty continues.

EURUSD: Found a base at 1.0650 in the reality check retreat. Pips banked from re-sells and I remain a rally seller as my preferred side.Lots of option interest tomorrow to keep in mind and shouls help contain range.USDJPY: Sharp retreat into 126.50 this morning on those comments out of Japan yesterday and pips banked again but keepingh core shorts. I still like the cheeky rally-sell as my preferred side.EURJPY: Now capping at 136.00 in the general EUR retreat and JPY demand.USDCHF: 0.9630 now forming a cap amid softer USD and demand for CHF but with SNB shadow still lurking in the dips despite their recent change in narrative but equally rally sellers poised too still.EURCHF: 1.0250-60 support line being tested again as I type after failure into 1.0300. SNB watching still but rally sellers continue to lurk.

AUDUSD: Still finding a base at 0.7050 but capping at 0.7100 now. GBPAUD now holding 1.7700 but capping into 1.7800 as AUDUSD finds that dip demand into 0.7050 again. NZDUSD capping at 0.6500 but bid into 0.6450. GBPNZD finding good support at 1.9350 but capping at 1.9450 as NZDUSD finds dip demand.USDCAD: 1.2800 support still 9large options around there today) but sellers remain poised into 1.2850-75 still.

Let's continue to be careful out there.

Interbank rates: 08.58 BST

GBPUSD 1.2566

EURUSD 1.0680

EURGBP 0.8500

GBPEUR 1.1767

GBPJPY 159.16

GBPCAD 1.6115

GBPCHF 1.2054

GBPZAR 19.7790

GBPHKD 9.7842

USDJPY 126.67

EURJPY 135.30

EURCHF 1.0255

EURHKD 8.3150

AUDUSD 0.7090

USDCAD 1.2821

USDCHF 0.9603

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