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  • Mike Paterson

Risk sentiment strong still as US bond yields surge again

Thursday 25 February 2021

Yesterday US Fed Chair Powell once again gave some dovish tones initially but then slightly more upbeat forecasts and the happy clappy brigade were out in force with US bond yields higher again along with firmer equity and oil markets.

The on-going better tones to risk sentiment mean we've seen further selling of JPY and CHF which has helped underpin those core and cross pairs amid some general USD supply in most other pairs. Yesterday's latest UK Treasury Select Committee grilling of BOE gov Bailey and other MPC members produced little of note with the usual either/or cautious tones by and large.

GBPUSD eventually found support at 1.4080 and has made an impressive rally to 1.4173 as I type helped by strong risk-on GBPJPY and GBPCHF demand but tempered by EURGBP rallying again to test 0.8630 as EURUSD leads the way higher this time.

EURGBP found a base at 0.8580 and now eating through those offers into 0.8630 (GBPEUR support at 1.1590). Support should come in at 0.8600 now where we have large option interest today.GBPJPY found a decent base this time at 149.20 after failing into 150.00 but rampant since amid the firm risk tones to post 150.40. Top heavy perhaps but still underpinned.

I remain poised to sell GBP into rallies as a jobbing preference but respecting dip demand still with price action ever fickle. Equally a case still for going long in the dips therefore as we continue to range. Patience and not getting greedy remain key.

USDJPY found dip demand at 105.80 this time amid some further JPY supply as per my ongoing warnings and now back up testing 106.20. EURJPY has dip demand now at 128.60 and breaking up through 129.50 now as EUR cross demand helps the risk-on trades. EURUSD has finally broken up through 1.2180 and 1.2200 after being underpinned at 1.2150 amid all the variable cross-plays still. USDCHF failed into 0.9100 but remains underpinned and finding good support now at 0.9040 amid the risk-on plays with EURCHF also underpinned and looking at the key 1.1055-60 area still as the SNB remains ever watchful/helpful.

AUDUSD duly found support at 0.7900-10 where we had those large option expiries in play yesterday to rally and bust the barrier option interest 0.8000 this morning as risk sentiment/ metal prices keep lending support. USDCAD has fallen through 1.2500 as oil price and risk rallied but holding 1.2480 so far.

A massive win last night for the mighty Shrimpers away at second in the table Forest Green Rovers and a wonder goal in the mix too. Onwards and ever hopeful.

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

Interbank rates: 08.33 GMT

GBPUSD 1.4140

EURUSD 1.2196

EURGBP 0.8624

GBPEUR 1.1595

GBPAUD 1.7698

GBPCAD 1.7680

GBPJPY 150.06

GBPZAR 20.8075

GBPHKD 10.9705

USDJPY 106.12

USDZAR 14.6890

EURJPY 129.40

EURCHF 1.1036

AUDUSD 0.7988

USDCAD 1.2502

USDCHF 0.9049

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