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  • Writer's pictureMike Paterson

Softer Greenback tones as another lively week closes

Friday 20 May 2022

Softer US bond yields, anticipation of weaker US growth after expected rate hikes along with more evidence that other CBs will be raising interest rates this year too has brought some USD selling back into the equation. The jury remains out though after another rollercoaster week in these ever-fickle markets.

Equities are on the rise again as are gold and oil and we're seeing a little firmer risk sentiment this morning after yesterday's reality check. PBOC cut 5-year rates in a bid to assist the housing market and hence help economic growth worries. UK retail sales came in better than expected this morning and have helped underpin the Pound for the moment but underlying 3-month sales trend remains weak.

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. We will continue to trade in ever-fickle markets so the need remains 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: A rapid rally above 1.2500 yesterday amid the USD selling but equally failing to hold and fell back below 1.2450. Failure since to break 1.2500 despite the Retail Sales data support but some dip demand expected amid softer USD tones. I remain poised to sell rallies but timing as ever is crucial.EURGBP: More two-way business with failure into 0.8500 bringing a retreat to 0.8465 as I type after yesterday's hold of 0.8450. Expect more of the same.GBPJPY: Held 158. yesterday and now 159.00 amid some better risk tone and core pair dip demand but rally sellers will remain poised.

EURUSD: Finding a base into 1.0550 and testing there again as I type after yesterday's look at 1.0600 amid softer USD/hawkish ECB double whammy. USDJPY: A good but not unexpected hold of 127.00 yesterday after its (over)extended retreat after breaking down through 127.30-50 support and now back up to 128.00. EURJPY: Old support line of 134.75 holding so far in the latest retreat after rally sellers prevailed above 135.50. Should remain underpinned in current scenario. USDCHF: A further retreat yesterday but seemingly a line being drawn at 0.9700. SNB shadow lurking down there but equally rally sellers poised too. EURCHF: Lows of 1.0230 and a line drawn at 1.0250 for the moment (USDCHF 0.9700 too suggests some SNB smoothing).

AUDUSD: Holding 0.7000 in the latest retreat and now pushing up through 0.7050 amid softer USD tones and some AUDJPY demand returning. GBPAUD has 1.7650-7750 as its range as core pairs remain tightly bound but underpinned too. NZDUSD recovering spome poised amid softer USD/firmer risk tones. GBPNZD broken support into 1.9500 now as NZDUSD rally outstrips GBPUSD. More bids 1.9450-80 and 1.9400-30. USDCAD: 1.2820 now broken on the softer USD/firmer risk double whammy after capping at 1.2850. Demand into 1.2730 where we have large option interest today.

Let's continue to be careful out there. Have a great week-end.

Interbank rates: 08.23 BST

GBPUSD 1.2465

EURUSD 1.0567

EURGBP 0.8478

GBPEUR 1.1795

GBPJPY 159.51

GBPCAD 1.5962

GBPCHF 1.2143

GBPZAR 19.7886

GBPHKD 9.7142

USDJPY 128.00

EURJPY 135.24

EURCHF 1.0282

EURHKD 8.2323

AUDUSD 0.7046

USDCAD 1.2803

USDCHF 0.9727

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