Greenback underpinned still

Friday 19 May 2023

USD demand notable again yesterday amid the ongoing tighter FOMC expectations and now better vibes on debt ceiling talks with the Greenback posting some fresh highs along the way but we've seen a little retracement in Asia and early European trading as USDJPY retreats helped by intervention on the soggy Yuan by Chinese state banks in the forward market. Cautious tones from BOJ's Ueda though still despite inflation creeping higher which will continue to frustrate JPY buyers.

G7 heads of state meeting atm and new sanctions on Russia has been the opening salvo. US Fed Chairman Powell and former Chair Bernanke take part in a panel discussion during a monetary policy research conference at 15:00 GMT and BOE'S Haskell speaks at 09.45 GMT. ECB's Schnabel and Lagarde speaking later.

Equities remain underpinned and showing strong gains yesterday with rally sellers coming second overall atm despite the fragile economic backstory and Fed tightening talk. WTI also steady but currently in retreat after a decent rally to $73.00 yesterday. Gold has extended its retreat to test $1950-55 after breaking down through the $1970 area amid the USD demand but bouncing back to $1970 while Ukraine/Russia war continues to be the main geo-political elephant in the room with ongoing US/China/Taiwan tensions in the mix too The world remains a fragile place for sure.

GBPUSD: Holding 1.2390 yesterday and this morning after failure 1.2450 with re-sells duly placed. I remain a rally seller as my preferred side. EURGBP: Capping into 0.8700 and a retreat from 0.8670 as GBPJPY demand helped underpin GBPUSD as EURUSD continued its retreat. Expect some two-way business still overall as core pair sentiment flutters around. GBPJPY: Basing around 171.20 this time after failure at 172.20 with USDJPY falling from its extended highs. Rally sellers ever-poised but dip demand expected for the moment still.

EURUSD: Support into 1.0760 in yesterday's further retreat amid the USD demand after failure into 1.0820 and I remain a rally seller as my preferred side. USDJPY: Support prevailing at 137.60-80 yesterday and breaking up through 138.25-30 resistance to test 138.80 in a repeat of the recent pattern. The Yun interbvention helping to cap as well as some USD supply. I still prefer to sell rallies/be long JPY overall but caution/patience still required as I've been warning.

More detailed analysis across a variety of pairs from mike@mspfx.co.uk. Mentoring details there too.

Interbank rates: 08.30 BST

GBPUSD 1.2417

EURUSD 1.0780

EURGBP 0.8680

GBPEUR 1.1517

USDJPY 138.05

GBPJPY 171.37

GBPCAD 1.6716

GBPCHF 1.1205

GBPZAR 24.0723

GBPHKD 9.6674

USDCHF 0.9027

EURCHF 0.9731

EURHKD 8.3940

AUDUSD 0.6650

NZDUSD 0.6263

USDCAD 1.3485