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  • Writer's pictureMike Paterson

Softer risk tones but jury still out

Tuesday 28 September 2021

We're seeing some softer risk sentiment prevailing this morning and some equity and oil retreat notable in early European trading after strong gains yesterday and that's being reflected in FX pairs.

With month-end looming the preliminary Citi estimate of month-end FX hedge rebalancing flows points to moderate USD buying still per my update yesterday, but stronger versus JPY as we're currently seeing. Therefore we're seeing good dip demand still on JPY pairs in the retreat. USD demand notable generally as US bond yields remain buoyant.

Amid all this market uncertainty I will repeat that patience and discipline in trading are key, as ever, and not being greedy.

GBPUSD: A good cp at 1.3730 yesterday and now looking at 1.3660 again in the latest retreat and pips duly banked from rally re-sells per ongoing strategy. I remain a rally seller while keeping an eye on EURGBP and GBPJPY as always.Large option interest at 1.3640-50 on Thursday also in the mix. EURGBP: Holding good support at 0.8525-30 again but equally atruggling to rally back up through 0.8550 amid some general EUR supply not helped by the German political uncertainty. GBPJPY: Good support at 151.80 amid the yesterday's firmer risk tomnes and month-end JPY supply but with sellers capping eventually at 152.60 as risk sentiment fades.

I remain a GBP rally seller across the pairs but being patient as ever. These are risk sentiment markets and ever fickle so good/tight position management essential.

EURUSD: 1.1700-10 now providing a cap amid the German election fall-out/softer risk tones but holding 1.1670 as I type. The pair still finds itself in the middle of cross-flow action and variable risk plays not to mention the ongoing option interest nearby. USDJPY: We've been up to look at 111.50 amid yesterday's firmer risk and USD tones and the month-end demand I highlighted yesterday. Still expecting dip demand in the retreats for the moment. EURJPY: Failing at 130.20 amid the general EUR supply post-German election and now softer risk plays again.

USDCHF: Finding a base at 0.9260 still as EURUSD retreats and with the SNB ever vigiliant as EURCHF holds 1.0820 in the latest retreat. EURCHF: Holding 1.0820 this time with SNB shadow ever present.

AUDUSD: A good hold at 0.7240 in yesterday's retreat but equally unable to hold gains above 0.7300. USDCAD: Yesterday saw another test and hold of 1.2600 on the fimer risk/oil tones and CADJPY buying but back above 1.2640 as oil caps. Ever larger option interest in play today as I've been warning.

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

Interbank rates: 08.35 BST

GBPUSD 1.3668

EURUSD 1.1682

EURGBP 0.8544

GBPEUR 1.1703

GBPJPY 152.12

GBPCAD 1.7279

GBPZAR 20.5521

GBPHKD 10.6489

USDJPY 111.27

EURJPY 129.98

EURCHF 1.0846

EURHKD 9.1016

AUDUSD 0.7273

USDCAD 1.2634

USDCHF 0.9283

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