This trading week risk sentiment was shaken back and forth. In this environment the typical price behavior could be observed for currencies with a higher beta. But it is also worth noting that the Dollar has not benefited that much from risk off against other majors this week. Of course, interest rate expectations play an important role either.
After the quite hawkish previous week (see Market update #1) the FX Markets lack some kind of phantasy how much more aggressive the FED can get on March the 16th than it is already priced in. The 10yr Treasury-Yield is likely to end the week below the 2% treshold and a minor correction to around 1.80% might follow.
(source: cnbc.com)
Implied Vols have not moved much since the last update. And there is a good chance we will see more consolidation next week and the week after that. At least for the time being the impact of the Russia-Ukraine conflict on currencies is small compared to stocks. So I expect protagonists with interest in FX Options could see slightly better Vol levels (up to a quarter point) in the next sessions.
(source: cme group, own representation)
Nevertheless all tenors above 1 mth with bigger vega exposure are quoted below the 7% treshold. That is still comparatively low but another catalyst is needed for the next jump in implied Vols.
Weekly closing levels to watch:
EURUSD -- Bulls do not want to see the pair closing below 1.1350 or even 1.1338
GBPUSD -- A close above 1.3600 is a bullish sign and a test of the 200 dma (1.3690) next week would be pending
USDJPY -- 114.90/114.80 is the level to watch for bulls
AUDUSD -- A close above the 0.7200 treshold increases the chances of a breakout to the upside next week
Have a good weekend!
Sebbo