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  • Writer's pictureMike Paterson

Risk-on sentiment still prevailing

Wednesday 3 June 2020

More of the same as we see large moves higher in Yen pairs as USDJPY surges up through 108.00, and USDCHF remains bid and that's underpinning core pairs too. Oil prices higher as are equities to keep the risk-on sentiment prevailing.

I still don't really get it but markets are what markets do and ours is not to reason why. If the mood of optimism over COVID is the driver then we wait to see if that's justified amid all the other global fragility but for now we can simply go with the flow or stand back. Trying to second-guess when it might turn round is dangerous still for the moment but I stand poised.

GBPUSD found itself ranging between 1.2530-60 after failing into the decent techincal level at 1.2575 as EURGBP bounced up and down between 0.8900-20 per my tweets. I hope the steer helped. Seen some further GBPJPY buying take it up through 1.2600 to post 1.2612 but lower again now at 1.2573.EURGBP failed at 0.8920 multiple times on its bounce from 0.8865 but held 0.8900 but we've broken down to look at 0.8880 only to rebound again as GBPUSD fails above 1.2600 and EURUSD gets through 1.1200.GBPJPY took off yesterday amid the risk-on sentiment then accelerated to 137.00 as USDJPY broke up through 108.00 triggering stops through 108.20 and 108.50 to post 108.85 so far.

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. Still no need to stand in the way of a truck hurtling at speed so my trading size remains smaller and cautious. Better than expected/flask UK Services PMI just released saw a small rally in GBP which was beginning to retreat prior but gains limited for the moment given there will be worse data to come amid all the lockdown inactivity.

USDJPY finally broke up through 108.00 triggering some short-position bail-outs given the surge through 108.20 and beyond to 108.85 as someone turned on the risk-on Yen sell button. I had been highlighting the dip demand at 107.50 and 107.30 and noted its reluctance to go lower amid the general supposed USD supply so I hope the steer helped. EURJPY surged on the Yen selling and underpinned EURUSD therefore but capped so far around 122.00.

EURUSD found itself underpinned at 1.1160 after breaking up through 1.1150 and posted 1.1228 on the USD supply/EURJPY demand double whammy. Large option expiries between 1.1210-20 today and helping to contain range.

USDCHF found support again at 0.9600 as EURCHF rallied to 1.0800 on the better risk/SNB helping hand combo.Still expect SNB in the dips.

AUDUSD got another lift in early Asia with some large AUDJPY demand in thin trading liquidity to surge through 0.6900 and post 0.6984 but retreating back to 0.6895 as I type and some pips from rally sells gratefully banked. Perhaps China's shadow not being totally ignored at the moment after all.

USDCAD has been down to look at 1.3480 amid the softer Greenback and better risk/firmer oil combo with CADJPY demand notable too again but some bounce since.

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

Interbank rates:  08.42 BST

GBPUSD   1.2577

EURUSD   1.1210

EURGBP   0.8912

GBPEUR   1.1219

GBPAUD   1.8161

GBPCAD   1.6984

GBPJPY   136.79

GBPZAR   21.4331

GBPHKD   9.7510

USDJPY   108.77

USDZAR   17.0457

EURJPY   121.94

EURCHF   1.0797

EURHKD   8.6914

AUDUSD   0.6923

USDCAD   1.3505

USDCHF   0.9630

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