Greenback surges higher

Thursday 11 April 2024

Yesterday's key US CPI data came in stronger than expected and with inflation proving a stubborn foe  the Greenback rallied immediately taking USDJPY through the key 152.00 resistance to test 152.50 before pausing. It wasn't long though before it caught a second gust of wind to sail all the way up to 153.20 and now has a base at 152.80. Equity markets tumbled on the hawkish implications of the data on rates and we saw some risk-off tones that brought with it JPY demand which helped cap USDJPY a little but also drove core pairs even lower.

We've heard plenty of noise since from the Japanese MOF/BOJ as expected but so far it's just that. Noise. Intervention fears will persist but no evidence of it as yet. The Bank of Canada yesterday left rates on hold as widely expected but with some dovish tones pointing to a June cut and we've seen decent CAD supply since.

ECB are the next Central Bank off the rank today at 12.15 GMT with expectations of rates on hold but jury out on when the first cut might be. Expect Lagarde & Co to remain cautious. US PPI data out as well at 12.30 GMT to very much keep in mind. The Ukraine/Russia war and Middle East Israel/Hamas/Houthi/Hezbollah/Red Sea tensions still cast their own shadow with threats of direct retaliation from Iran adding to the fragile risk tones.

Equities tumbled which saw risk appetite wobble after yesterday's US CPI before steadying in Asia but jury remains out while WTI has traded tightly again amid the Middle East unknowns and capped at $86.00 once more after holding $84.00 as the second-guessing continues. Gold retains its allure amid the wobbly risk tones, inflation fears and reports of Central Bank buying but in consolidation mode between $2320-50 for the moment.

GBPUSD: Capped again around 1.2700-10 and initial rapid slide to 1.2600 yesterday post-CPI helped by GBPJPY supply but tempered by some EURGBP selling too before breaking down through to test 1.2520-30 support and steady since. I remain a rally seller as we continue to range overall. EURGBP: Failing around 0.8570-75 again but holding 0.8545 in the extended retreat amid the ongoing ECB/BOE rate cut conjecture as we wait on ECB. GBPJPY: Good two-way business again amid the variable risk appetite post-CPI. Capped at 192.85 still but holding 191.30-50 in the retreat and now testing 192.50 again as risk steadies. Sellers will remain poised but some caution still required for the moment.

EURUSD: Support around 1.0725 this time after capping into 1.0860 yesterday before the CPI-led tumble into 1.0780 initially then the further push lower. I remain a rally seller as my preferred side. ECB looming with lots of option contracts in play too. USDJPY: Up up and away through 152.00 from 151.80 post-CPI and despite a couple of pauses/mini-retreats along the way helped by the softer-risk JPY demand we've now posted 34-year highs of 153.22 and remain underpinned. Once again expecting dip demand for the moment. 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