Risk appears to be back on today as concerns over the Middle East tensions have subsided somewhat. There were no reported casualties from yesterday’s attacks and the market took this as a positive and as such we saw a jump in gold,oil and the US 10 yield. USDJPY is sitting around the session highs of 109.42 after hitting a low of 107.62 after Iran’s first missile strike. Support now lies at 108.95, today we have a very big option expiry at 109.25 so we may gravitate towards that rate around expiry time however, ADP print was much better yesterday and if we get a good NFP print on Friday coupled with no more escalating tensions in the Middle East then there’s a good chance we could test the resistance area of 110.05/10. On the flipside a move through 108.95 and this would open the way for 108.60 and then 108.30. US President Trump said in a televised address that “Iran appears to be standing down,” and that “Iran will never be allowed to have a nuclear weapon. He also said the US will immediately impose additional financial and economic sanctions on Iran.
EURUSD again been very subdued with very little action. For now we are hovering around 1.1100 and with chunky expiries around that level we can’t really see it moving too far from here at the moment. Yesterday’s German factory orders were shocking -1.3% vs 0.2% expected highlighting that the Eurozone’s strongest economy is still very much struggling. We are still of the belief that the single currency will test lower, the main catalyst will be the US/Iran tensions and the NFP number tomorrow. Should we get a strong print then we can see it breaking the 1.1090 support area and test 1.1060 followed by 1.1030. On the topside we have resistance at 1.1140 followed by 1.1200.
GBPUSD yesterday tried pushing higher but stopped around 1.3170. During the European session it fell through the support area of 1.3140 and couldn’t get back above it. Cable was further weighed down by comments from EC president Ursula von der Leyen who warned that there would be tough talks ahead with regards to free trade negotiations. Mrs von der Leyen said the UK cannot expect free movement of goods and services without free movement of people, and there would be a “more distant partnership” between the UK and EU in future. Worse news for GBP came this morning from Governor Carney at The Future of Inflation Targeting Conference where he delivered a more dovish tilt to his speech, he said that economic growth in the UK had slowed below potential, persistent weakness could require a prompt response and more importantly said that QE,forward guidance and rate cuts are all part of tools at the disposition of the BoE. At this point cable was already trading near the sessions lows of 1.3070 and subsequently traded a low of 1.3017 which was very near our target yesterday. Going forward today we feel there is a chance if we can get below 1.3010/1.3000 then we should see 1.2900, on the topside resistance lies at 1.3085/90. GBPEUR is 1.1740.