Yen still the prime mover

Tuesday 20 August 2024

USD supply still notable overall with USDJPY once again leading the way and in another rollercoaster ride amid these thin trading conditions. Plummeting into 145.80 in Asia only to recover rapidly to 147.30 and now back below 147.00 as I type. Some JPY supply overall on the better risk appetite but the cross flows once again impacting core pairs too. Nothing of note causing the current volatility so caution still required.

The RBA Minutes released earlier were on the hawkish side and given AUD another lift. Today's slate has also just brought an expected 25bps rate cut from Sweden's Riskbank with comments that they see 2-3 more cuts this year. Data-wise we have Canadian CPI at 12.30 GMT with Fed heads Bostic and Barr up to the rostrum later but not expected to comment on monetary policy. FOMC Minutes will be released on tomorrow, flash PMI readings from Thursday along with the start of Fed Chair Powell's annual Jackson Hole symposium.

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 globally are off their lows but capping again as European trading gets underway. WTI has fallen again and capped at $74.00 before falling back to $73.00-10 this morning as the jury remains out. Gold  posting fresh record highs of $2514 as I type after holding around $2500 following Friday's surge. Dip demand should remain but profit-takers/sellers still poised.

GBPUSD: Support at 1.2960-70 now and a further push higher to test 1.3000-10 amid the USD supply but also impacted both ways by the variable JPY moves/sentiment. I prefer rally-sell side still overall but good two-way business and patience as ever a virtue. EURGBP: Finding support at 0.8520 now in the dip but sellers prevailing and poised around 0.8530-35. ECB/BOE rate cut conjecture continues along with the risk flows. GBPJPY: More volatility and two-way business amid the fickle USDJPY behaviour. Sellers prevailing at 191.30 after a rapid retreat into 189.50 before a bounce back to from where it came and now 190.50 again.

EURUSD: A further rally from 1.1060-70 amid the USD supply but cross flows helping to cap into 1.1090-00 so far where we also have decent option interest. I remain a rally seller as my preferred side overall but happy to be patient atm. USDJPY: More volatility for the pair and JPY crosses per my summary above. Sharp drop into 145.80 in early Asia before bouncing to 147.25- 30 and now in retreat again into 146.50 as European trading gets underway. Expect more volatility but I prefer playing the rally-sell side still. Dip buyers will still expect some value down here too. Entry level/patience is key for both sides. EURJPY: Finding support at 161.60 but with sellers prevailing into 163.20 amid the general JPY volatility.

USDCHF: Support at 0.8610-20 broken this morning amid further USD supply after capping at 0.8630-50 as the risk and USD juries remain out.EURCHF: Capping at 0.9560-60 but holding 0.9520 again so far with EURUSD underpinned albeit not racing higher. Expect more two-way business.

AUDUSD: Enjoying the USD supply/RBA stance/commodity ccy grab and posting 0.6738 so far after the rally from 0.6700 I remain a rally seller overall as my preferred side while we continue to range amid the cross flows and USD variables but caution naturally required atm. GBPAUD: Up to 1.9330-40 as I type after holding 1.9280-00 amid the cross flow variables. NZDUSD: Capping into 0.6135 currently after holding 0.6090-00 helped by the general USD supply but still subject to cross flows. GBPNZD: Capping at 2.1320-30 but finding support at 2.1180-00 amid the cross and core pair flows.

USDCAD: Holding 1.3615 as I type after the retreat from 1.3650-60 but support from softer oil tones still. Expect more two-way amid the oil/USD/risk variables.Canadian CPI at 12.30 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: 08.10 BST
GBPUSD    1.2993
EURUSD    1.1078
EURGBP    0.8525
GBPEUR    1.1728
USDJPY    146.86
GBPJPY    190.80
GBPCHF    1.1177
GBPZAR    23.1195
GBPHKD    10.1270
USDCHF    0.8611
EURCHF    0.9538
EURHKD    8.6334
AUDUSD    0.6727
NZDUSD    0.6127
USDCAD    1.3625