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  • Writer's pictureMike Paterson

Normal service is resumed as risk-off sentiment returns

Tuesday 9 June 2020

Yes folks, seems the strange days of the past week or so are behind us (for the moment at least) as markets undergo a little bit of a reality check and we've seen some risk-off sentiment return in Asia and early European trading.

The NY session saw some USD supply across the board as algos and traders continue to second-guess tomorrow's US Fed policy announcement but we've seen some decent correction since. No real news of note so perhaps the recent move just got over extended and the fog has lifted but that's not to say it will get any clearer. Either way though it makes more sense to me again. Hurrah !

GBPUSD yet again found the expected dip demand I highlighted again yesterday, this time around 1.2630, and we've been up to the heady heights of 1.2755 on that general USD supply and some EURGBP selling before retreating to 1.2671 as I type. EURGBP failed at 0.8930 and has been down to 0.8864 (GBPEUR upto 1.1282) amid some ongoing EUR supply and helping put a bid under GBPUSD again but finding dip demand again this morning.GBPJPY ran out of steam after it's surge to 139.60 on Friday and the combo of USD supply and risk-off has seen a solid retreat to test 136.50.

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. Dip demand still expected though given the recent rally.

USDJPY finally got the reality check I had been hoping for as a preferred rally seller and we've seen a good retreat from 109.60 to test the old support line at 107.80 amid the risk-off Yen demand again.EURJPY failed above 124.00 and broke through the decent support as USDJPY retreated and now been down to test bids at 121.30 amid the softer risk plays. EURUSD never really liked the recent high altitude and failed into 1.1320 and has now broken down through those decent bids at 1.1280 to test the next line at 1.1260. USDCHF also capped at 0.9640 and fell back through the recent support line at 0.9600 to test 0.9550 now even with EURUSD falling as EURCHF also retreated to look at 1.0750 from 1.0830 amid the latest wave of risk-on sentiment. SNB will still be propping up the dips.

AUDUSD posted highs of 0.7043 on that NY USD supply, highs not seen since December, but has also had its own reality check on the softer risk and now testing 0.6925. Selling helped by the AUDJPY supply as longs start to bail out.USDCAD held 1.3350 and has rallied strongly on the softer oil/CADJPY and CADCHF risk-off selling to test 1.3480 as I type.

Let's continue to be careful out there in all things. Staying safe must be our main priority still.

Interbank rates:  08.09 BST

GBPUSD   1.2689

EURUSD   1.1266

EURGBP   0.8877

GBPEUR   1.1264

GBPAUD   1.8272

GBPCAD   1.7034

GBPJPY   137.14

GBPZAR   21.3272

GBPHKD   9.8308

USDJPY   108.07

USDZAR   16.8606

EURJPY   121.77

EURCHF   1.0788

EURHKD   8.7269

AUDUSD   0.6946

USDCAD   1.3425

USDCHF   0.9576

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