Risk sentiment still fragile

Mike Paterson
Oct 20, 2023
2 min read

Friday 20 October 2023

The Middle East tensions continue to dominate and the Greenback is generally off its highs as US bond yields cap for the moment but remaining underpinned apart from USDCHF which continues to retreat amid the ongoing CHF safe-haven demand. USDJPY still banging against 150.00 prompting MOF/BOJ intervention fears with JPY and CHF demand helping to cap core pairs too.

Fed's Powell yesterday gave the market both dovish and hawkish interpretations from his speech providing a flurry of volatility with markets still thinking Fed will pause, helped by the US bond sales, but equally not ruling out another hike. Soggy UK retail sales data this morning has added to the Pound's woes following two historic by-election losses for the government overnight.

Equities are in retreat again after a rally in NY post-Powell and still on their lows in Asia/early Europe amid the softer risk tones. WTI holding $86.00 yesterday and a strong rally to $89.50 yesterday amid fears of supply issues on Israel's planned invasion of Gaza but with the jury still out amid the uncertain global economic picture too. Gold has found support around $1950 this time and a solid climb to fresh highs amid the fragile risk tones but with natural sellers ever poised still. 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: Capping between 1.2180-00 yesterday and breaking down through 1.2150-60 to finally test 1.2080-00 in the wake of the by-elections and soggy UK retails.Some option interest potentially in play again today.I remain poised for further re-sells when momentum fades.EURGBP: Still underpinned as GBP remains under pressure across the board with a hold of 0.8685 and now testing 0.8735. GBPJPY: Holding 181.30-40 as I type after a cap at 182.50with rally sellers ever poised still amid the fragile risk.

EURUSD: 1.0550 support this time after capping at 1.0620 in the algo-led spike immediately on Powell remarks amid the USD supply but then just as quickly back down to 1.0550-60 again. I remain a rally seller overall. Decent size options today helping to contain. USDJPY: 149.70 holding this time but rallies capping into 150.00 again with MOF intervention fears still there and risk-off JPY demand plus some option interest again. I remain a rally seller as preferred side overall at these elevated levels but with patience a virtue as ever.

More detailed analysis across a variety of pairs and 1-2-1 mentoring sessions for traders from mike@mspfx.co.uk

Interbank rates: 08.43 BST

GBPUSD 1.2113

EURUSD 1.0571

EURGBP 0.8727

GBPEUR 1.1458

USDJPY 149.90

GBPJPY 181.57

GBPCAD 1.6577

GBPCHF 1.0798

GBPZAR 23.0751

GBPHKD 9.4259