Tuesday 31 October 2023
The Bank of Japans's much touted YCC tweak disappointed markets and JPY hawks with it not being expanded to 1.5% as expected, but the 1% prior ceiling was made a "reference" level and 10y JGB yields being allowed to rise above 1%. Cue JPY supply with USDJPY rallying to test 150.30-50 resistance/offers from 149.20. Ueda's press conference clearly showed he doens't see inflation being sustained and they will not hesitate to take easing measures if necessary.
Elsewhere the Middle East back-story continues with the IDF making more physical inroads into Gaza and no ceasefire in sight. Some USD supply prevailing again with all eyes on the FOMC tomorrow but all tightly bound still with JPY supply and helping to underpin core pairs post-BOJ helped by some firmer risk tones
Equities have been generally firmer amid the variable fragile risk sentiment and on the rise this morning. WTI capping at $83.50 amid the uncertain global economic picture too and testing $81.50 before finding some support. Gold capping at $2000 this time with natural sellers ever poised still but has found support around $1990. Geopolitical concerns still very much a threat to market stability with focus on increasing Ukraine/Russia tension and now with the Middle East sadly to the fore.
GBPUSD: Support forming now between 1.2120-30 amid some USD supply and up through 1.2160 (where we also have options expiring today) and looking to test the stronger 1.2180-00 area as we continue to range tightly amongst all the unknowns including the BOE this week. I remain poised for further entries when momentum fades. Options in play today at 1.2145. EURGBP: Now up through 0.8720-30 and posting 0.8745 as GBPUSD rally lags EURUSD but ranging still overall amid core pair fluctuations. GBPJPY: Holding 181.30-50 this time and now back up through 182.50 again on the JPY supply but with sellers ever poised still amid the fragile risk.
EURUSD: Support at 1.0580 then 1.0600 aamid the USD supply and EURJPY demand but capping at 1.0645 so far as we continue to range tightly. I remain a rally seller overall. USDJPY: 149.80 the current base after the hold of 148.80 in yesterday's retreat on BOJ expectationd and now testing 150.30-50 offers/res. MOF/BOJ intervention fears still there but should remaiun underpinned for the moment otherwise. Re-sells placed up here and I remain a rally seller as preferred side overall at these elevated levels but with patience a virtue as ever.
For more detailed analysis across a variety of pairs email mike@mspfx.co.uk
Interbank rates: 08.42 BST
GBPUSD 1.2167
EURUSD 1.0637
EURGBP 0.8741
GBPEUR 1.1438
USDJPY 150.33
GBPJPY 182.93
GBPCAD 1.6819
GBPCHF 1.0990
GBPZAR 22.8577
GBPHKD 9.4804
USDCHF 0.9011
EURCHF 0.9585
EURHKD 8.2726
AUDUSD 0.6367
NZDUSD 0.5848
USDCAD 1.3821
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