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  • Mike Paterson

Some softer risk tones return

Tuesday 31 May 2022

No great surprise to this writer that after yesterday's better risk sentiment aided by China ending COVID lockdowns we're now seeing equities trading off their highs again but underpinned still as is gold while oil is on a surge higher again as the EU finally agrees to ban two-thirds of its Russian imports rising to 90% by year-end. Some JPY and CHF demand in the mix and helping to cap cross and core pairs in these ever-fickle markets.

Final month-end flows can not be ruled out today (moderate USD demand) so keep an eye on the 4pm London fix but I think it would mostly have been done by now. Never assume in Forex though so, as ever, I repeat my view that it's a case of not over-analysing but keeping your focus on price action in core and cross-pairs. We will continue to trade in ever-fickle markets so the need remains to identify ranges and what levels present value for money. Algos will continue to knee-jerk price action on the variable headlines versus natural flows. Discipline is key as ever.

GBPUSD: Very large option expiries today casting a shadow still as I warned yesterday with 1.2660 capping but equally the 1.2600 area still supporting. Some pips banked in the latest reteat from yesterday's re-sells and I remain poised to sell rallies but timing as ever is crucial. EURGBP: Holding 0.8500 again after a faiklure at 0.8525-30 as we continue to range tightly. More two-way expected with options in play today too.GBPJPY: Holding 161.00 in latest retreat after capping into 162.00 but sellers poised still as the risk uncertainty continues.

EURUSD: Finding a decent base at 1.0725 after yesterday's look at 1.0785. Some option interest in play today. USDJPY: Solid rally to 128.35 helped by yesterday's firmer risk JPY supply but equally now in retreat to 127.65 amid this morning's softer risk tones. EURJPY: Capping at 138.00 with sellers poised once risk sentiment turns sour as I warned yesterday but bids and support into 137.00 amid the fickle risk tones.USDCHF: 0.9600 now broken but struggling to make real progress with some CHF demand helping to cap but with SNB shadow lurking in the dips still.EURCHF: Yesterday's risk on rally capped around 1.0330 but now finding 1.0300 as the support line in the earlier retreat. SNB smoothing still but rally sellers continue to lurk.

AUDUSD: Still finding a base at 0.7150 helped by the commodity ccy feel-good demand and looking at the decent 0.7200 resistance again as I type after yesterday's failure. GBPAUD capping at 1.7600 and testing 1.7500 as AUDUSD rally outstrips GBPUSD again. NZDUSD also feeling some love and still supported at the former 0.6525 resistance. Sellers into 0.6600. GBPNZD finding support at 1.9250 this time after capping into 1.9350 again as NZDUSD finds dip demand still.USDCAD: On the back foot still amid firmer oil tones after rallying from fresh lows into 1.2650. I prefer rally sells for the moment.

Let's continue to be careful out there.

Interbank rates: 08.38 BST

GBPUSD 1.2614

EURUSD 1.0738

EURGBP 0.8512

GBPEUR 1.1747

GBPJPY 161.06

GBPCAD 1.5992

GBPCHF 1.2122

GBPZAR 19.6395

GBPHKD 9.8310

USDJPY 127.68

EURJPY 137.12

EURCHF 1.0322

EURHKD 8.3690

AUDUSD 0.7180

USDCAD 1.2677

USDCHF 0.9612

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