The SNB hiked its key interest rate by 25 basis points to 1.75% this morning. The next central bank event is the BoE, which is also expected to raise interest rates by 25 basis points (from 4.5% to 4.75%) in the european afternoon. The Dollar is trading offered again but still above the 102 treshold. Dollar longs are now tricky so close to the low for the year. Below 100.80, one should get rid of longs for now. It is unlikely that the support holds a third time. Overall, however, the environment of low volatility could be over for the time being. Nevertheless, the FX market is currently still lagging the stock market somewhat.
EURUSD -- 1.0997
The currency pair has touched the discussed 1.1000 level this morning. Thus, the upper end of the range 1.0500/1.1000 has been reached. Ideally, however, it should not go much higher than the February high at 1.1033. Above that, the probability increases that 1.1096 will not end the rally either.
USDCHF -- 0.8947
Below the 0.9060 pivot line and the 50 ema (0.9020), the currency pair is offered. However, as long as the pair trades quite in the middle between 0.9060 and the old low at 0.8820, positioning is difficult. The quoted implied volatilities are at a very low level. In this respect, I would rather recommend a straddle at current spot levels. If you are interested, I will be happy to calculate one or two maturities with b-e analysis. A short comment below is sufficient.
GBPJPY -- 181.30
Sterling had a very good run against dollar. The dollar had a very good run against the yen. The sum of both is given by the currency pair above and I am expecting some volatility soon. Starting with this afternoon’s expected rate hike of the BoE I am especially awaiting tomorrow’s Japanese CPI numbers:
CPI (YoY)(May) 4.1% consensus (3.5% previous)
CPI ex Food, Energy (YoY(May) 4.4% consensus (4.1% previous)
It should be recalled that the BoJ's key interest rate is currently -0.1%. If the inflation figures are confirmed tomorrow, I expect an adjustment of the interest rate outlook, which could be larger. Unfortunately, I cannot make any trading recommendations here. The currency pair is of course insane. The monthly chart shows some signs of overbought conditions but the next real resistance level is still about 8% away.
Good luck,
Sebbo