Thursday 27 October 2022
No prizes for guessing where the markets attention will be lunchtime today. The ECB is expected to hike by 75bps which is largely factored in but by no means certain. Traders will then look to the extent of December hike and beyond as we know the ECB have said they will continue to hike rates for a few months yet. Yesterday's less than expected BOC rate hike will no doubt be discussed. There will also be interest in QT and while Lagarde may admit that discussions are taking place, the message has been that QT will start once rates reach neutral. TLTRO clues will also be keenly awaited.
Elsewhere we've continued to see softer USD tones overall as US yields retreat albeit with some revrsal off the lows this morning. Markets second-guessing that the BOC's less than expected 50bps hike indicates more dovish tones from the Fed. Pivot talk may be overcooked but it's still there. Oil and equity markets making their minds up still, as is gold as it continues to decide exactly what role it serves in these ever-fickle markets.
Whatever your view/take/analysis one thing is clear, we are experiencing global markets in panic/confused/second-guessing mode the like of which we haven't seen for many a year, indeed decade. As always, remember that conjecture and second-guessing should stand to one side on data and CB releases. Focus on the price action and let the algos do the heavy lifting/dropping. The important thing is to identify your preferred risk/reward entry/exit levels.
GBPUSD: Another solid rally amid the softer USD tones before capping at 1.1645 amid good two-way business. I remain a rally seller overall. Large option expiries at 1.1500 today again. EURGBP: Finding support at 0.8645 after the break of 0.8660 but capping at 0.8680-85 as I type. I still expect some two-way business with the Eurozone facing issues of its own and ECB today. GBPJPY: Finding decent support around 169.00 again as core pairs find dip demand after capping above 170.00. USDJPY still particularly vulnerable to softer USD tones.
EURUSD: Also making good use of the USD supply ahead of the ECB's expected rate hike today and now up through 1.0050 to test next resistance at 1.0080-00.Cross flows, risk, Ukraine and ECB conjecture all in the frame still as well as USD flows and ECB. Decent option interest again today too. USDJPY: An orderly retreat still to test 145.00 this time amid the USD selling but bouncing this morning as some yield differential returns but jury out on how long it lasts. EURJPY: Tightly bound still as EUR demand counters JPY demand. ECB casts a shadow. USDCHF: In further retreat amid the USD supply but support coming in at 0.9850-after capping at 0.9930-50. EURCHF remains underpinned for the moment albeit off its highs but with SNB never far away and ECB looming. EURCHF: A further rally to look at 0.9960 and holding 0.9900-20 now with EUR dip demand still into the ECB. .
AUDUSD: Holding 0.6400 this time and a strong rally helped by USD supply to test 0.6525 amid some two-way business as we failed at 0.6500 initiall.I remain a rally seller as my preferred side. NZDUSD finally now holding the old resistance of 0.5780-00 to post 0.5865 amid the USD supply but in retreat as I type. .USDCAD: Capped at 1.3650 post-BOC and finally broken down through 1.3550 in the retreat per my tweets but finding support around 1.3530 son softer oil tones and some USD demand returning.
Interbank rates: 08.55 BST
GBPUSD 1.1600
EURUSD 1.0073
EURGBP 0.8680
GBPEUR 1.1520
GBPJPY 169.00
GBPCAD 1.5743
GBPCHF 1.1444
GBPZAR 20.8840
GBPHKD 9.0365
USDJPY 145.64
EURJPY 146.70
EURCHF 0.9932
EURHKD 7.8441
AUDUSD 0.6481
NZDUSD 0.5841
USDCAD 1.3566
USDCHF 0.9863
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