Greenback grabbing continues

Tuesday 16 April 2024

As markets wait on further developments in the Middle East we've seen more USD demand dominate the FX picture amid strong US data (this time Retail Sales) and markets pushing back even further on US interest rate cuts. USDJPY has extended its surge higher to post 154.60 in the absence of any actual intervention from the MOF/BOJ as yet although it still can't be ruled out.

UK labour data this morning showed an increase in unemployment but rise in wages hence a mixed GBP reaction. Fed speakers today include Chair Powell, Jefferson, Williams and Barkin. BOE's Bailey and BOC's Macklem on the slate too. The Ukraine/Russia war remains pushed back in the world's attention but  the increased Middle East Israel/Hamas/Houthi/Hezbollah/Red Sea tensions still cast their own shadow.Remember as always to identify your preferred levels and let the algos do their thing along with the natural and speculative flows but don't get greedy.

Equities retreated again yesterday amid the Israel retaliation fears this time but currently just off their lows and steadier in Asia/early European trading as jury remains out and dip buyers lurk. WTI capped this time at $86.00 before retreating to test $83.50 then capping at $85.50-60 in the bounce as the second-guessing continues. Gold retains its allure overall amid the wobbly risk tones and found a base at $2320-30 but a cap into $2400 since as some profit-taking continues.

GBPUSD: Capped around 1.2500 yesterday and an extended retreat into 1.2400 amid the USD demand but holding there so far with some better risk tones returning and renewed GBPJPY dip demand. I remain a rally seller as we continue to range overall. EURGBP: Failing around 0.8555 still but holding 0.8525-30 again as the ECB/BOE conjecture continues. GBPJPY: Capped at 192.70 this time in a solid rally amid beter risk tones and USDJPY up through 154.00 with no sign of intervention still after holding 191.00. Sellers will remain poised but some caution still required amid these fickle markets.

EURUSD: Support around 1.0600 yesterday in the extended retreat after capping into 1.0650-60 amid the USD demand. I remain a rally seller as my preferred side. USDJPY: We've now posted fresh highs of 154.60 and remain underpinned after yesterday's hold of 153.50-60. I still say we'll end up lower but still expecting dip demand in the current scenario of no/delayed FOMC cuts and no Japanese FX intervention. Patience a virtue as ever here.

Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk