Risk-on sentiment returns
Tuesday 7 December 2021
COVID/Omicron unknowns continue to lurk but the consensus of scientific evidence grows in favour of its lessening impact and markets have gone back into risk-on mode with 10 and 30 year US bond yields rising as too are equities and oil. Bitcoin has bounced back above $51000 while Gold continues to tread water around $1780.
Second-guessing on Central Banks will continue to cast a shadow with the Fed meeting on 15 Dec and both ECB and BOE on 16th. Last night the RBA kept rates on hold as expected with no hikes forecast until 2023 but dependent on inflation and COVID.
As always, don't over-analyze but keep your focus on price action in core and cross-pairs and recent ranges to see whether we hold or break and what levels present value for money. If in doubt, stay out. Patience can often be a virtue.
GBPUSD: Based around 1.3230 helped by risk-on EURGBP supply and GBPJPY demand but capping at 1.3290 a few times since amid he general USD demand. GBPUSD rally sellers, including me, ever poised while keeping one eye at least on the EURGBP and GBPJPY cross flows. EURGBP: Capped at the pivotal 0.8525 (1.1730 support) area amid the risk-on EUR supply but the retreat not getting below 0.8490 (1.1780 resistance) but still helping to underpin GBPUSD. Expect more 2-way business amid the general uncertainty. GBPJPY: 150.40 now providing the support line amid the better risk tones but capping above 151.00 in the extended rally. Should continue to see good two-way business as risk sentiment continues to be ever-fickle.
I remain a GBP rally seller across the pairs overall as my preferred trading side albeit still against the grain currently so being patient as ever. These markets are ever-fickle so good/tight position management essential.
EURUSD: Support at 1.1275 again after holding 1.1265 but capping into 1.1300 amid the firmer USD and risk tones. USDJPY: Top of my trading range at 113.60 now broken on the firmer USD/risk tones but 113.80-00 resistance still proving a step too far. EURJPY: 128.00 support now after the fall from 128.50 so far as Euro risk-on supply exceeds JPY selling. USDCHF: Support at 0.9220-30 this time around with the SNB ever vigilant and EURCHF back above 1.0400 and pushing higher with CHF supply exceeding EUR selling initially but retreating to 1.0418 from 1.10440 as I type. EURCHF: A decent rally on the better risk with SNB shadow lurking still but failing at 1.0450 with sellers poised up there as I've been warning.
AUDUSD: Strong rally post-RBA amid better risk AUDJPY demand and commodity currency demand generally. A good test of 0.7100 but we have large option interest there today and helping to cap as I type. USDCAD: Capped around 1.2830 this time helped by the rise in oil price and hence CADJPY demand again and now below the previous support line of 1.2740 but with more coming in around 1.2700-20.
Let's continue to be careful out there in all things. Staying safe must be our main priority still.
Interbank rates: 08.16 GMT