Risk-off trades prevailing as another reality check gathers pace
Thursday 12 May 2022
Firmer US CPI data yesterday, softer than expected UK GDP earlier this morning highlighting the main problem now in the global economy with rising inflation and retreating growth. Throw in Finland applying to join NATO in what is a major turn of events and not going to placate Putin amid ongoing war in Ukraine and, et voila, we have markets running scared again. No surprise to me, or my readers here hopefully.
Equities tumbling, cryptos on the slide, oil softer but supported by some supply fears still, gold a little firmer but not exactly flying higher on a safe-haven basis for the moment. JPY demand notable again helping to drive cross pairs lower and capping core pairs. Some CHF demand bu USDCHF holding its own amid some generally firmer USD tones and EURUSD retreat.
For new and older readers alike 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.Continue to identify ranges and what levels present value for money. Algos will continue to knee-jerk price action on the variable headlines. Discipline is key as ever.
GBPUSD: Good two-way business in the past 24 hours and finally breaking down through key 1.2250 support to post lows of 1.2180. I remain poised to sell rallies as ever.EURGBP: Posting heading highs of 0.8618 once we'd cleared 0.8585 in the latest rally but equally falling back now to 0.8570 as I type as the two-way traffic continues amid other cross flows running through core pairs. I expect dip demand to continue albeit rally sellers poised amid the uncertainty. GBPJPY:A sold break of the 160.00-20 support and down it came in a rush to post 156.85 as I type amid the softer risk tones and triggering stops along the way. Suits my on-going strategy on core pairs.
EURUSD: Support at 1.0480-00 now history and triggering stops as the risk-off eurjpy and eurchf supply helps push the pair lower to 5-year lows of 1.0450. It was a good dip-buy play while it lasted and we can now expect that area to become decent resistance. I remain a rally seller as my preferred side. USDJPY: Struggled to rally back through 130.00 amid fragile risk tones post US CPI and finally breaking down through 129.50 to now test 128.50 in the extended retreat amid large JPY demand. I still like the cheeky rally-sell when momentum fades and latest moves will be testing patience of those holding longs.EURJPY:Support at 137.00 history as the pair triggers stops amid the risk-off JPY demand and tumbles to 134.30 as I type. Euro weaker across the board. Should be a good battle down with the usual EUR dip buyers. USDCHF: Support at 0.9875 in yesterday's retreats but now back up to 0.9860 as EURUSD retreats but rally tempered by EURCHF supply amid some general CHF risk-off demand. SNB will not be far away.Sellers remain poised as the uncertainty continues.EURCHF: 1.0430-50 support broken and now testing 1.0380-400 as I type with the SNB keeping an eye on it all for sure. Rally sellers poised now around 1.0430 then 1.0450-60.
AUDUSD: Another retreat and a test of 0.6875 now after after a rally failure at 0.7050 yesterday. GBPAUD testing 1.7750 from 1.7650 as AUDUSD retreat outstrips GBPUSD. NZDUSD capped at 0.6375 and now looking at 0.6250 in the extended retreat.GBPNZD testing 1.9550 now after finding support into 1.9400-20. Sellers at 1.9580-00, 1.9620-35. Bids 1.9480-00, 1.9430-50.
USDCAD: Finding a base now at 1.2980 and back up to 1.3030 amid some softer oil/risk CADJPY selling. Still looking underpinned for the moment but more option interest today in play nearby.
Let's continue to be careful out there.
Interbank rates: 08.40 BST