Wobbly risk tones return
Friday 22 April 2022
A bit of a turnaround in the past 24 hours as equity markets have another wobble and the softer risk tones amid a generally firmer USD and higher bond yields sees JPY demand return helping to drive core pairs lower. Talk of US/Japan joint FX intervention put the wobbles under USDJPY too.
Soggy UK retail sales data shows how higher prices are impacting on consumer spending and that's not good news for a consumer/service-led economy and supports my long-held bearish view. GBPUSD has tumbled through 1.3000 triggering stops along the way to test 1.2900 this morning helped by GBPJPY and GBPCHF supply with EURGBP demand in the mix too.
Equities have found some support in the dips again as have gold and oil but all three off their latest highs. Meanwhile the atrocities in Ukraine sadly continue as we enter a new phase with tensions escalating further.
GBPUSD: Per my comments above a tumble to 1.2900 this morning after yesterday's 1.3090 highs. A break of 1.2880-00 sets up a further fall to 1.2750-00 I reckon but we have a mixed bag out there right now and will need another perfect storm to get there in a rush. I remain a rally seller overall while keeping an eye on EURGBP and GBPJPY as always. EURGBP: A hold of 0.8300-10 in yesterday's EUR-led retreat but now up poised to test 0.8380 as GBP has its own sell-off this morning. I've been expecting dip demand down in recent updates so I hope the steer helped but equally I think sellers still poised as the uncertainty continues. GBPJPY: Support at 167.00 now history as the GBP supply/JPY risk-off demand double whammy sees both core pairs in retreat and now this pair testing 165.25 as I type. Lively times returning and suiting my strategy thankfully.
EURUSD: A perfect storm of over-extended rally on ECB rate hike talk, large option interest at 1.0900, firmer USD and softer risk tones has seen a break of 1.0800 this morning after yesterday's highs around 1.0935. USDJPY: Holding 127.70 in the latest retreat from 128.65 and it still looks underpinned. Should continue to see some two-way pips amid the uncertainty though. EURJPY: Support at 138.25 holding so far as dip demand lurks still but jury remains out amid renewed softer risk tones. USDCHF: Holding 0.9450-60 still and now 0.9520-30 in the latest retreat amid firmer USD tones and EURUSD retreat despite EURCHF capping too as dip demand expected with the SNB casting a shadow still. EURCHF: A retreat t0 1.0320 amid the EUR selling and softer risk tones but with the SNB lurking in the dips.
AUDUSD: Not feeling any love right now amid the firmer USD/softer risk tones and currency commodity selling. Now testing 0.7300 after capping this time at 0.7380-00 and some pips gratefully banked. Should see good two-way business still overall so take your pick down here but I prefer rally-sell side still. Same combined story for NZDUSD as it falls through 0.6700 in latest retreat from 0.6720-40 area. USDCAD: Another commodity currency getting smacked atm and up to 1.2670 from the revisited 1.2550 support. Two-way business still expected amid all the uncertainty but I warned yesterday that volatility has definitely returned after those recent tight ranges.
The mighty Shrimpers return to the hallowed Hall tomorrow and hoping for another win to back up Monday's 3 points and head into the final games on a roll.
Let's continue to be careful out there in all things. Staying safe must be our main priority still. Have a peaceful week-end everyone.
Interbank rates: 08.36 BST