Risk-off sentiment returns
Wednesday 15 April 2020
Yesterday I said I really didn't get the risk-on sentiment that we've been seeing, only accepting that we were witnessing some form of relief rally from the extreme moves lower earlier on the COVID-19 fallout.
Well, now we have a little reality check going on with equities and oil lower as the OPEC+ deal also gets a reality check and safe-haven demand for Yen and Swiss Franc return which means we're seeing core pairs in retreat too. I'm not saying it's all going to be one-way back down again from here but this latest move proves a timely reminder that economically and politically the worst is very much yet to come.
GBPUSD has capped at 1.2650 and now testing 1.2525-30 support again as I type on the softer risk plays. Re-sells duly made upstairs and profit taken on this retreat while staying core short. I have advised about being patient and staying out if need be but remaining poised to jump back in. Either way you've played this I hope the counsel has given you a good steer. EURGBP has found support into 0.8680 (GBPEUR resistance 1.1520) and now rallied to 0.8737 (GBPEUR down to 1.1445) again as the GBP correction outstrips that of the Euro. Not surprising given that the opposite has been recently true.GBPJPY has capped at 135.50 and that 30-50 area has now proved to be a decent line in the sand.
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. Equal argument still for buying dips though atm too as I expect to see some decent two-way business for the moment albeit with a softer bias now we've had some re-balancing.
USDJPY has fallen to test 107.00 on yesterdays general USD supply and I've duly taken some profit around 107.05 (as per my tweet yesterday) and will look to re-sell now on rallies into 107.50 then 107.80-00.EURJPY has fallen to look at 117.20 after capping at 117.80 on the softer risk sentiment/core pair supply. EURUSD yesterday failed into 1.1000 and has since fallen to test 1.0920-30 support as I type.USDCHF has dropped back below 0.9600 after capping above 0.9650 yesterday but now rallying to post 0.9640 as EURUSD falls with EURCHF finding support around 1.0540 again with the SNB still supporting.
AUDUSD rallied again to post 0.6445, perhaps in a test of 1bln expiries at 0.6450 today, but sellers have prevailed and now posting 0.6335 helped by the AUDJPY risk-off supply. USDCAD has found a base around 1.3880 before bouncing to now test 1.4000 as oil retreats sharply and we see some CADJPY selling too on the softer risk. Yesterday the SA Reserve Bank cut interest rates by another 100bps to 4.25% and we've seen some further Rand depreciation albeit with some GBPZAR retracement as the Pound generally reverses some gains.
Let's continue to be careful out there in all things as ever. Staying safe must be our main priority still.
Interbank rates: 08.22 BST