GBP: A volatile week for GBP, influenced by CIT headlines and month-end dynamics, which appeared to clean up USD shorts in the market. However, Trump’s shift toward doubling steel tariffs and adopting a tougher stance on China—mirrored by China’s weekend response—added complexity. We’re maintaining our USD exposure, primarily in options, and are closely monitoring US data this week following last week’s uptick in jobless claims. Flow-wise, there was notable USD buying from corporates and RM, likely tied to month-end activity.
Despite EURGBP rebounding after failing to close below the 200-day moving average (now 0.83805), attention has shifted back to GBPUSD. The pair broke through 1.3520 and is now targeting recent highs around 1.3595/00. While it’s challenging to be bullish on the UK, GBP appears to benefit significantly from USD diversification trends. It may be premature to overanalyze this. Final Manufacturing PMIs and US ISM are key today, with EURGBP levels at 0.8370/80 and 0.8450/60, while GBPUSD support remains at 1.3450.
JPY: The USD is broadly weaker this morning, pulling USDJPY back to the 142 handle. Technically, this is favorable for JPY bulls after repeated failures near the cloud and the 50-day moving average. This aligns with the idea that stronger buyers are supporting JPY, preventing extended sell-offs. However, it’s unclear if these buyers are local, leaving USDJPY as another USD play for now. Additional evidence to the contrary could prompt medium-term downside positions. Softer US hard data, especially during this NFP week, could also shift focus to JPY. Last week’s month-end rally wasn’t strong enough to capitalize on, but selling into rallies remains the strategy. Resistance is now at 143.50/60, with support at 141.90/00 ahead of 140. US ISM data is due later.
CHF: The dollar remains under pressure, with USDCHF testing May’s lows of 0.8186. May saw significant CHF selling from HFs and RM, as the franc was used as a funding currency. This aligns with rate markets pricing a 34 bp cut at the upcoming SNB meeting. However, today’s price action suggests a renewed “sell America” trend, favoring safe havens and likely capping further CHF sell-offs. For now, we remain neutral on CHF. This morning, Swiss data was weak, as retail sales and manufacturing PMIs declined; however, services showed a slight uptick.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!