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  • Writer's pictureMike Paterson

Softer risk tones amid increasing COVID concerns

Friday 10 July 2020

I've been warning all week that we live in fragile risk times overall with COVID-19 resurgence seemingly being ignored but as another week closes we've seen some risk-off plays dominate again.

Markets ever fickle though so we can still expect FX pairs to see some good two-way business so don't get too greedy on winning positions as I always say. European equities moving a tad higher again as I finish my report as if to prove the point.

GBPUSD yesterday had one final push into 1.2680 where there was also a strong technical line lurking along with some decent sell interest. Re-sells eventually placed at 1.2650-60 after the final failure and not wanting to rush in as per my tweet.We've since retreated to post 1.2567 amid the softer risk tones.EURGBP has been tightly bound since testing 0.8950 as core pairs rally and retreat in sync amid the variable risk/USD tones. Good demand now at 0.8945-50 and 0.8925-30 still but sellers poised at 0.8985 and 0.9000.GBPJPY enjoyed a final run up to test 135.60 but since retreated yet again amid the generally softer risk sentiment and rally sellers in core pairs too break down through 135.00 and 134.80 triggering stops.

I stay poised to sell GBP rallies overall as my preferred side and buy back in the dips as ever but patience continues to be a virtue and entry level key as always. I still expect to continue seeing some dip demand but cross-flows, risk sentiment and Brexit will continue to see a mixed bag as we've been witnessing.

USDJPY has now finally given up on 107.00 on the softer risk tones/Yen demand but holding the next line at 106.75-80 for the moment. EURJPY capped at 121.80 with core pairs both finding rally sellers amid the softer risk and since retreated to test decent bids at 120.25-30. EURUSD duly failed at 1.1360 where we had some decent size option expiries providing a cap as per my tweets. Re-sells duly placed again and the impact of cross-flows and expiries clearly evident again with EURGBP and EURJPY sales helping to push it lower again which has now seen a move below 1.1260 earlier before finding some demand again as I type.

USDCHF has enjoyed another move above 0.9420 as EURUSD retreated and EURCHF finds the usual dip demand but sellers at 0.9430 prevailing for the moment as EURUSD moves up from 1.1255. The SNB will be ever vigilant in the dips.

AUDUSD has had a further move lower to 0.6924 amid the latest COVID resurgence in Melbourne and the threat of China economic retaliation ever lurking but still finding some dip demand. USDCAD duly found support at 1.3500 where we had 800m expiries yesterday, a decent chunk in this pair as per my tweet. Softer oil price and some risk-off CADJPY selling has seen 1.3630 since but falling back as I type amid a small risk/oil rally.

Lots going on right now, and the foreseeable future, so don't forget to contact me if there's areas of trading these volatile markets or how to make best use of the order boards and expiries, that you might need some further help with.

I wish you good trading and let's continue to be careful out there in all things. Staying safe must be our main priority still. Enjoy some rest over the weekend.

Interbank rates:  08.18 BST

GBPUSD   1.2585

EURUSD   1.1287

EURGBP   0.8967

GBPEUR   1.1155

GBPAUD   1.8139

GBPCAD   1.7136

GBPJPY   134.49

GBPZAR   21.2514

GBPHKD   9.7517

USDJPY   106.83

USDZAR   16.8779

EURJPY   120.48

EURCHF   1.0625

EURHKD   8.7420

AUDUSD   0.6940

USDCAD   1.3610

USDCHF   0.9421

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