All very fragile still

Tuesday 21 May 2019

Yesterday's glimpse of risk-on sentiment was once again quickly replaced by risk-off as the fragile global conditions gave markets the jitters once more. The Pound has hit further lows as the Brexit fallout continues while the Aussie Dollar duly retraced its post-election gains helped by expected dovish tones from the RBA. A little bit of USD demand notable but in essence it's back to risk-off Yen and Swiss Franc demand helping to cap core pairs.

GBPUSD has now posted fresh lows of 1.2688 not seen since January helped by the renewed GBPJPY and GBPCHF supply along with EURGBP rallying back to 0.8788 after holding 0.8750. May's "revised" Withdrawal Agreement appears doomed once again (ever thus imho) as Labour reportedly says it will vote against and she's unable to placate her own party even with an offer to throw herself on her sword.

EURGBP buyers around 0.8750 (GBPEUR sellers at 1.1430) are prevailing still as I warned yesterday.GBPJPY has fallen again on the softer risk/GBP combo and now looking to test support at 139.50 again as USDJPY makes its mind up around 110.00 still.

I remain GBP bearish overall and continue to rally-sell as my preferred strategy and buy back in the dips amid all the uncertainty/indecision including Brexit. No change to this view for the foreseeable future. Rallies are getting weaker but provide good opportunity for sellers still as long as you're not looking for too much.

Meanwhile EURUSD continues to find itself on the back foot as we head into the EU parliamentary elections this Thursday helped by the EURJPY and EURCHF selling which is just outweighing the EURGBP demand. USDJPY duly failed around the 110.30 sell interest again that I've mentioned recently but equally found support from the 109.80 buyers. Definitely still a case of rinse and repeat.

USDCHF remains tightly bound amid the risk uncertainty with EURCHF falling back and the SNB watching closely still. EURCHF bids now between 1.1250-60 then 1.1230 and 1.1200 with offers at 1.1300 and 1.1330 then 1.1360, 1.1380 and 1.1400 still. Immediate USDCHF bids at 1.0080 again then larger between 1.0050-60, 1.0030 and 1.0000 with sellers still between 1.0120-30, 1.0150,1.0180 and 1.0200. I continue to play both sides in these current ranges.Good two-way pips to be had with a dip-buy preference.

I warned yesterday that the AUD jury remains out in that post-election rally and duly failed once again at the 0.6935 sell interest to fill the gap down to 0.6870 as Lowe and the RBA Minutes hint at a June rate cut. Not exactly a surprise but a timely reminder that despite the existing government being returned the same domestic problems remain as well as the US-China trade concerns/expected RBA rate cut scenario.

USDCAD continues to make its mind up amid generally better bid tones to USD and oil price. Price centred around 1.3450 along with large option expiry interest there today.

Sad news today that Formula 1 legend Niki Lauda has passed away aged just 70. RIP Niki and thanks for some great memories and inspiration.

Interbank Rate 08.28

GBPUSD 1.2694

EURUSD 1.1151

EURGBP 0.8783

GBPEUR 1.1383

GBPAUD 1.8464

GBPCAD 1.7045

USDJPY 110.11

USDZAR 14.4502

EURJPY 122.78

EURHKD 8.6459