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  • Writer's pictureMike Paterson

USD demand and firmer risk tones return but jury remains out

Friday 13 May 2022

After yesterday's extended risk-off moves which saw JPY demand send USDJPY down to test strong support at 127.50, and drag cross/core pairs lower with it, we've seen some solid USD demand on hawkish Fed talk and Powell keeping a 0.75% rate hike on the table. Throw in some dovish monetary policy tones from the BOJ and we've seen a good rally to 129.35 with USDCHF breaking back up to test 1.0050 before some selling returned on both as the uncertainty continues.

Bond yields higher again, equities and cryptos have recovered some poise as has oil but gold has retreated on the better risk tones. Gold showed its true colours yesterday perhaps in its lack of risk-off rally as I noted here but holding $1800 so far.Risk sentiment will remain fragile per my ongoing base strategy. All that fun and games in the past 24 hours and today is Friday the 13th!

For new and older subscribers alike I repeat my view that it's still a case of not over-analysing but keeping your focus on price action in core and cross-pairs.Continue to identify ranges and what levels present value for money. Algos will continue to knee-jerk price action on the variable headlines versus natural flows. Discipline is key as ever.

GBPUSD: Good two-way business again in posting fresh lows into 1.2165 but equally failing to get back above the now pivotal 1.2250-60 area. Some pips banked along the way per my tweets and I remain poised to sell rallies as ever. Option interest in play today at 1.2200. EURGBP: A solid retreat yesterday on the risk-off EUR selling across the board but holding around 0.8500 support which I highlighted on Twitter but equally failing to hold above 0.8520 in the rally. I still expect dip demand to continue albeit rally sellers poised amid the uncertainty.GBPJPY: The risk-off retreat finally came to a halt around 155.75 with core pairs finding dip demand after the extended moves lower. Some firmer risk tones have seen an attempt on 158.00 but falling back as the uncertainty continues and USDJPY falls back to 128.50.

EURUSD: Down, down deeper and down came this pair yesterday on the risk-off EUR retreat triggering stops across this and cross pairs to look at 1.0350 but now back above 1.0400 albeit with sellers still poised.USDJPY: Another prime mover and 127.50 tested before rallying to 129.35 before a return to where we started at 128.50.The latest moves will only add to the uncertainty for longs so caution and position-size management required.EURJPY: Lows of 132.70 in the extended retreat but failing at 134.25-30 in the recovery. I said yesterday "Should be a good battle with the usual EUR dip buyers." I see no reason to change my view with sellers poised too.

USDCHF: Good support at 0.9950 and a solid rally to 1.0050 after the Fed chatter/better risk but falling back as I type. SNB will still not be far away EURCHF sellers poised as the uncertainty continues. EURCHF: 1.0350 support now with the SNB keeping an eye on it all still but rally sellers poised around 1.0430 still as I warned yesterday.

AUDUSD: Lows of 0.6830 in yesterday's retreat and now testing 0.6900 amid some AUDJPY dip demand. GBPAUD finding some good suppoort around 1.7700 as I type after failing at 1.7850. NZDUSD supported around 0.6220 but capped at 0.6260 as I type. GBPNZD finding support into 1.9500-20 but equally failing at 1.9600. USDCAD: A decent rally to 1.3080 amid yesterday's softer oil/risk CADJPY selling. In retreat for the moment amid the return of some CADJPY demand but more option interest today in play nearby.

Last game of the season for the mighty Shrimpers of Southend. It's at our hallowed Hall and hopefully 3 points and a chance to pay tribute to loyal Club servant/legend John White who's testimonial game I'm helping to organise on the 22nd. Bring it on!

Let's continue to be careful out there in all things. Have a good week-end everyone.

Interbank rates: 07.18 BST

GBPUSD 1.2210

EURUSD 1.0390

EURGBP 0.8508

GBPEUR 1.1752

GBPJPY 157.25

GBPCAD 1.5873

GBPCHF 1.2229

GBPZAR 19.5523

GBPHKD 9.5119

USDJPY 128.76

EURJPY 135.00

EURCHF 1.0414

EURHKD 8.0936

AUDUSD 0.6887

USDCAD 1.3008

USDCHF 1.0023

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