Yesterday began with JPY demand returning and cross pair flows helping to cap core pairs amid softer risk tones and we saw more of the same as the day played out with equity markets and commodities tumbling in yet another reality check. The keenly awaited US PCE data had a softer headline albeit with a firmer employment index but ultimately markets decided it is going to need a 50bps cut from the FOMC to keep on track. Those softer risk tones remaining this morning as I type but finding some dip support.
In Asia we saw Aussie GDP softer than expected while today's data slate features some more EZ and UK PMI data, US trade balance data, factory orders and the JOLTS job openings but focus will also be on the latest monetary policy decision from the Bank of Canada. Some forecasts for a 50bps rate cut. US NFP jobs/wages data the focus on Friday.
While the CB, political and currency second-guessing continues, not to mention the geopolitical tensions, rememver that the key is to identify your preferred risk reward levels and let the algos do their thing along with the natural and speculative flows. Don't get greedy or over-analyse. If in doubt stay out.
Equity markets remain on the back foot this morning and the question now is will get another day of the same or will dip buyers prevail in these ever-fragile times. WTI tumbled yesterday on the softer risk tones but also helped by the resumption of supply in Libya and still heading lower to $69.30 as I type after yesterday's fall from $72.80-00. Gold has struggled to find any risk-off support amid the general commodities sell-off but finding support around $2480 albieit capping lower at $2495-00. Dip demand should remain but sellers still poised.
GBPUSD: Support at 1.3080 after capping into 1.3150 with the return of GBPJPY selling and EURGBP dip support continuing to provide supply. I prefer rally-sell side still overall but good two-way business and patience as ever is a virtue. EURGBP: Finding support at 0.8415-20 still as GBPJPY supply prevails. Sellers still poised around 0.8435. ECB/BOE rate cut conjecture continues along with the risk flows. GBPJPY: Two-way business amid the fickle USDJPY behaviour but on the backfoot amid the risk sell-off. Capping at 190.80-00 and testing 1989.70 in this morning's extended retreat. Expect more of the same.
EURUSD: A hold of 1.1025 in yesterday's retreat helped by EURJPY supply but capping at 1.1060 this morning as we continue to range tightly amid the cross flows and fickle USD. I remain a rally seller as my preferred side overall. USDJPY: Capping above 146.20 yesterday and falling again this morning to take another look at 144.80. Expect more two-way opportunities on the variable USD/risk flows but I prefer playing the rally-sell side still. Entry level/patience remains key for both sides. EURJPY: Finding support below 160.00 so far with sellers prevailing into 161.00 now amid the ongoing JPY volatility.
USDCHF: Support at 0.8470-80 in the latest retreats amid the risk-off and softer USD tones after capping at 0.8510. EURCHF: Capping at 0.9400 but holding 0.9370 in this morning's extended dip. Expect more two-way business but with sellers still poised.
AUDUSD: Holding 0.6695-00 this morning after capping into 0.6730 helped by the AUDJPY supply and pushed lower by the softer GDP data. Expect more two-way business in these ever-fickle markets. I prefer rally-sell side. GBPAUD: Holding 1.9480-00 as AUDUSD retreat outstripped GBP supply again but capping at 1.9580-00 so far. NZDUSD: Capping into 0.6200 amid the NZDJPY supply but holding 0.6165-70 so far as we continue to range. GBPNZD: Now holding 2.1180 but capping at 2.1240 with cross flows in play still.
USDCAD: Holding 1.3530 now amid some fresh CADJPY selling and softer oil but capping at 1.3550-60 yesterday amid softer USD despite oil tumble as we continue to range tightly ahead of today's BOC decision at 14.00 GMT.
Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk
Let's continue to be careful out there.
Interbank rates: 07.25 BST
GBPUSD 1.3107
EURUSD 1.1049
EURGBP 0.8429
GBPEUR 1.1863
USDJPY 145.27
GBPJPY 190.42
GBPCHF 1.1118
GBPZAR 23.5235
GBPHKD 10.2048
USDCHF 0.8489
EURCHF 0.9378
EURHKD 8.5972
AUDUSD 0.6703
NZDUSD 0.6175
USDCAD 1.3543