Category: Currencies

  • Loonie Vulnerable as Oil Slides, Data Lags – Tuesday, 2 June

    Where we are: USD/CAD currently trades at 1.3839, a touch higher on the day after a tight overnight range of 1.3836-1.3854. The pair is holding just above its overnight lows. Price action suggests a mild bid to the USD, but volumes are light pre-NY data.

    What’s driving it: Domestic headwinds continue to weigh on the Canadian Dollar. The Bank of Canada’s easing bias remains in place, with Macklem citing tariff uncertainty and a softer growth path at the last meeting. This is despite sticky CPI at 7.1% YoY. The drop in WTI crude to $91.10 is adding further pressure to the Loonie. While domestic yields are up slightly, the widening US-CA 10Y spread to +101bp favours USD strength.

    • WTI crude’s 1.5% slide below $92 acts as a direct drag on CAD.
    • The US-CA 10yr yield spread now exceeds 100bp, a key psychological level that should attract further USD buying.
    • Speculative positioning is moderately short CAD (-68,882 contracts), yet the reading is only at the 52nd percentile, suggesting limited squeeze potential.

    NY session focus: Focus today will be on the 10:00 ET JOLTS Job Openings release. Strong numbers could further support the USD and push USD/CAD towards the 1.3850 resistance level, and beyond towards recent highs near 1.39. A downside surprise could trigger a brief dip towards 1.38, but the overall bias remains tilted towards USD strength. The trade that’s working is to fade CAD rallies. The trade at risk is chasing USD/CAD lower on any dips. The pain trade is a sharp rebound in oil prices sparking a short squeeze in CAD.

  • Aussie Cautiously Higher as Focus Turns to GDP – Tuesday, 2 June

    Snapshot: AUD/USD is trading at 0.7177, up 0.16% on the session. The Aussie is finding some support from slightly firmer copper prices and a modestly weaker DXY. All eyes are now on the Q1 GDP print due at 11:30 AEST tonight.

    • The RBA remains reluctant to commit to a cut path, citing uneven progress on inflation and a tight labour market. A softer Q1 trimmed-mean CPI would be needed to unlock a May or July move.
    • Watch the 10:00 ET JOLTS job openings print. A surprisingly weak number could amplify any Aussie gains by weighing on the US dollar.

    Bias into NY: Mildly bullish into the data, targeting a break above 0.7187 if the GDP data beats expectations. Failure to push higher post-data suggests a retest of 0.7150 support.

  • USD/CHF Sags as SNB Easing Pressure Intensifies – Tuesday, 2 June

    Snapshot: USD/CHF trades at 0.7858, down 0.11% on the session, pressured by the SNB’s active easing stance. Schlegel’s recent comments indicating a willingness to consider negative rates again if disinflation overshoots keeps the pressure on the Franc. All eyes on 10:00 ET JOLTS data out of the US.

    • The Swiss 2Y yield sits at just 0.084%, reinforcing the SNB’s dovish bias and weighing on USD/CHF.
    • A significant risk stems from potential SNB FX intervention, which could trigger a sharp CHF appreciation if deployed aggressively.

    Bias into NY: Expect continued pressure on USD/CHF as the SNB’s easing stance remains a dominant force. A break below 0.7845 would open the door to further downside.

  • Kiwi Remains Heavy as RBNZ Easing Bias Persists – Tuesday, 2 June

    Snapshot: NZD/USD trades at 0.5930, down 0.13% on the day, weighed down by the RBNZ’s firmly entrenched easing bias, reinforced by the recent 25bp cut in April and Governor Orr’s signaling of further easing if disinflation takes hold. Today’s JOLTS data at 10:00 ET will be closely watched as a cross-driver.

    • Watch for a break below 0.5918 (day low) to confirm bearish momentum.
    • Risk of a short squeeze if JOLTS disappoints, given the modestly short speculative positioning.

    Bias into NY: Downside favored on the RBNZ’s dovish stance, targeting a retest of the 0.5900 level, though DXY strength adds further pressure.

  • Loonie Treads Water Amid Dovish BoC Signals – Monday, 1 June

    Where we are: USD/CAD is currently trading at 1.3825, up 0.17% on the day. Intraday, we’ve seen a range of 1.3790 to 1.3839. The pair continues to struggle to break decisively above the 1.3800 handle, and is trending towards the upper end of its recent range, with prior NY close around 1.3801.

    What’s driving it: The Canadian dollar is facing headwinds from the Bank of Canada’s dovish stance, despite recent positive macro prints. While the central bank held rates steady at 2.75% at its last meeting, Governor Macklem cited tariff uncertainty and a softer growth path, keeping easing on the table; this dovish backdrop is pressuring the Loonie even as oil prices trend higher. The 102bp spread between US and Canadian 10-year yields further supports USD/CAD.

    • The Bank of Canada’s easing bias is still alive, but increasingly data-contingent; this is evident in Macklem’s recent remarks.
    • Speculative positioning remains modestly short CAD (-68,882 contracts), but has decreased significantly from the previous week (-37,651 w/w), indicating a potential shift in sentiment.
    • Despite WTI crude climbing to 89.79, the Loonie has not benefited significantly, suggesting domestic drivers are overriding the commodity link.

    NY session focus: The main focus for the NY session will be the 10:00 ET ISM Manufacturing PMI and Prices data. A stronger-than-expected print could fuel further USD strength and push USD/CAD towards the 1.3850 level; conversely, a weaker print may see the pair test support around 1.3775. Later, traders will also be looking for any market-moving commentary from 20:30 ET FOMC Member Powell Speaks. The pain trade for the Loonie would be a hawkish repricing of the BoC, forcing shorts to cover.

  • NY Session Tactical Brief – Monday, 1 June

    Regime: Risk-on, supported by easing global inflation expectations as indicated by lower US 10Y yields and firm equities futures.

    Today’s market themes:

    • ISM Day: US ISM Manufacturing PMI key for near-term Fed rate path signals.
    • USD strength: DXY gains traction amid mixed global growth outlook, impacting emerging market stocks.
    • Oil price volatility: Geopolitical tensions and supply concerns continue to underpin oil prices.

    The setup: ISM Manufacturing PMI at 10:00 ET will be crucial in determining the near-term Fed outlook. A print above 53.3 could fuel further DXY gains and pressure risk assets, while a miss could see yields dip and equity futures rally. Watch US 10Y around 4.45%.

    Watch list (native time per event):

    • 10:00 ET USD: ISM Manufacturing PMI (forecast 53.3, prior 52.7)
    • 10:00 ET USD: ISM Manufacturing Prices (forecast 85.3, prior 84.6)
    • 20:30 ET USD: FOMC Member Powell Speaks

    Bias by asset:

    • DXY:
      • Direction: Higher.
      • Domestic (US): ISM data crucial; Fed rhetoric leaning hawkish.
      • Cross: Risk-off flows supportive; EUR/GBP weakness adds to momentum.
      • Levels: Resistance 99.20, Support 98.80.
    • EUR/USD:
      • Direction: Lower.
      • Domestic (EU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength weighs; US-DE 10Y widening pressures.
      • Levels: Resistance 1.1670, Support 1.1630.
    • GBP/USD (Cable):
      • Direction: Neutral to slightly lower.
      • Domestic (UK): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength a headwind; US-UK 10Y supportive.
      • Levels: Resistance 1.3480, Support 1.3440.
    • USD/JPY:
      • Direction: Higher.
      • Domestic (JP): BoJ still slow to tighten; intervention risks persist.
      • Cross: US 10Y driving force; DXY strength adds to upward pressure.
      • Levels: Resistance 159.75, Support 159.20.
    • USD/CAD (Loonie):
      • Direction: Higher.
      • Domestic (CA): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength dominating; US-CA 10Y favors USD upside.
      • Levels: Resistance 1.3850, Support 1.3790.
    • AUD/USD (Aussie):
      • Direction: Lower.
      • Domestic (AU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength; China growth concerns remain.
      • Levels: Resistance 0.7190, Support 0.7150.
    • NZD/USD (Kiwi):
      • Direction: Lower.
      • Domestic (NZ): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength; risk-off sentiment hurting commodity currencies.
      • Levels: Resistance 0.5990, Support 0.5940.
    • USD/CHF (Swissy):
      • Direction: Higher.
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength; safe-haven demand muted.
      • Levels: Resistance 0.7870, Support 0.7820.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): Mixed, relative CB stance drives direction.
      • Domestic: ECB vs BoE/BoJ expectations key for cross-pair movements.
      • Cross: Overall DXY strength; risk impacting JPY leg most.
      • Levels: Monitor key levels on a case-by-case basis.
    • XAU (Gold):
      • Direction: Lower.
      • Domestic (asset-specific): Real yields rising limits upside.
      • Cross: DXY strength a major headwind.
      • Levels: Resistance 4580, Support 4520.
    • XAG (Silver):
      • Direction: Mixed.
      • Domestic (asset-specific): Industrial demand supportive, but volatile.
      • Cross: DXY strength weighs; risk appetite fluctuates.
      • Levels: Resistance 7660, Support 7420.
    • WTI / Brent:
      • Direction: Higher.
      • Domestic (asset-specific): Geopolitical tensions support; supply concerns.
      • Cross: DXY strength can limit some upside.
      • Levels: WTI Resistance 91.50, Support 88.50.
    • Copper:
      • Direction: Higher.
      • Domestic (asset-specific): China demand concerns still linger despite recent gains.
      • Cross: Dollar strength may temper upside for now.
      • Levels: Resistance 660, Support 640.
    • SPX:
      • Direction: Sideways to slightly higher.
      • Domestic (US): Data-dependent Fed outlook influences direction.
      • Cross: Risk sentiment driving force; watch VIX reaction.
      • Levels: Futures resistance 7630, cash support 7570.
    • NDX:
      • Direction: Sideways.
      • Domestic (US): Earnings season winding down, focus on macro.
      • Cross: Higher rates sensitivity; VIX affecting valuations.
      • Levels: Resistance 30600, Support 30350.
    • US30 (Dow):
      • Direction: Sideways to slightly higher.
      • Domestic (US): Cyclical sectors showing resilience.
      • Cross: Bond yield direction drives sentiment.
      • Levels: Resistance 51400, Support 50700.
    • UK100 (FTSE):
      • Direction: Lower.
      • Domestic (UK): Sterling weakness supportive, but overall global risk weighs.
      • Cross: Heavily affected by general mood across US/global markets.
      • Levels: Resistance 23450, Support 23300.
    • DAX:
      • Direction: Sideways.
      • Domestic (DE): No fresh domestic catalyst — sensitive to US response.
      • Cross: US tech sector; DXY driving some investor sentiment.
      • Levels: Resistance 25350, Support 25100.
    • Nikkei:
      • Direction: Sideways to slightly higher.
      • Domestic (JP): Consolidation around record highs.
      • Cross: US tech; overall risk appetite important for sentiment.
      • Levels: Resistance 67300, Support 66200.
    • BTC:
      • Direction: Sideways to slightly lower.
      • Domestic (asset-specific): ETF flows influence price.
      • Cross: Heavily linked to DXY; sensitive to tech direction.
      • Levels: Resistance 74100, Support 71800.

    Positioning watch: USD is crowded long at 81st percentile, and JPY remains crowded short (0th percentile) presenting squeeze risks on any dovish pivot from the Fed or a BoJ hawkish surprise. Copper and BTC are crowded long as well, both at 94th, suggesting downside risks on weaker data.

    The pain trade: A weaker-than-expected ISM, combined with Powell hinting at openness to rate cuts, would trigger a sharp rally in bonds and equities, squeezing USD longs and JPY shorts simultaneously.

  • Dollar Grinds Higher, Fed Patience Remains Paramount – Monday, 1 June

    Where we are: The DXY is currently trading at 99.06, up 0.13% on the day, having carved out a 98.89-99.06 range so far. This pushes it above Friday’s close, driven by a moderate bid as EU cash markets progress. Focus remains squarely on the US data flow and whether it will prompt a rethink on the Fed’s timeline.

    What’s driving it: The Fed’s patient hold remains the primary driver, with any sustained dollar strength conditional on continued disinflation and a cooling labor market. Firm payrolls or a re-acceleration in services inflation would likely push back expectations of rate cuts, fueling further USD upside. The market is also mindful of the possibility of a Fed rate hike before year-end, especially if inflation remains sticky.

    • Powell’s remarks, warning against politicizing the Fed, underscore the central bank’s commitment to its data-dependent approach.
    • The 2s10s spread sits at 0.47%, a modest steepening of 1.0bp, suggesting a slight easing of recession fears but not enough to meaningfully alter the Fed’s calculus.
    • CFTC data show speculators are holding a crowded net long USD position, at the 81st percentile, indicating squeeze risk on any dovish surprise.

    NY session focus: The ISM Manufacturing PMI and ISM Manufacturing Prices, both released at 10:00 ET, will be closely watched for signals on inflation and economic activity. US 10Y yields, currently at 4.452%, will likely dictate the pace of any dollar move. If the data beat expectations, look for a push towards 99.25 in the DXY. At 20:30 ET, FOMC Member Powell speaks, providing a further opportunity for market participants to gauge the Fed’s thinking. The pain trade here is a soft ISM print that triggers a short squeeze in crowded USD longs.

  • EUR/USD Pressured by Dollar Strength and Data Ahead – Monday, 1 June

    Where we are: EUR/USD is currently trading at 1.1643, down 0.15% on the day. The pair has been confined to a tight intraday range of 1.1642-1.1665. This level is testing Friday’s low and suggests a potential break lower if dollar strength continues through the NY session.

    What’s driving it: The Euro is under pressure as the ECB maintains a mild easing bias. While some ECB policymakers would have supported an April rate hike, the general consensus leans towards a data-dependent approach. Dovish signals are being reinforced by recent Eurozone data. The benign view on inflation expressed by Eurozone consumers is not being matched by investor sentiment, who are seeing that this could cause them to lag behind in their targets compared to their American counterpart. DXY strength, now at 99.06, is exacerbating the Euro’s woes.

    • ECB’s Schnabel highlights the risk of unanchored inflation expectations stemming from geopolitical uncertainties.
    • Eurozone HICP remained at 2%, while Core HICP (excl energy, food) fell by 0.1% to 2.3%.
    • Speculator positioning in the Euro is modestly long, with net non-commercial contracts at +29,426, leaving room for potential long liquidation.

    NY session focus: All eyes are on the US data today, specifically the ISM Manufacturing PMI at 10:00 ET. A stronger-than-expected print (forecast 53.3) could fuel further dollar strength, pushing EUR/USD lower, potentially testing 1.1600. Conversely, a miss could offer a temporary reprieve. Also on tap is FOMC Member Powell Speaks, this could bring about changes in dollar rates. The current trade favors short EUR/USD on rallies. The pain trade is a weak ISM print combined with dovish Powell remarks leading to a dollar sell-off.

  • Cable’s Rally Stalls at 1.3475 Resistance – Monday, 1 June

    Where we are: GBP/USD is trading at 1.3456, marginally lower on the day (-0.01%). Cable has traded in a tight 1.3446-1.3476 range so far today. This level is just below Friday’s close. Resistance is likely to be found at the intraday high and then psychological resistance at 1.35.

    What’s driving it: Sterling is struggling to find direction as the market digests recent UK data. The Bank of England’s cautious stance, underscored by the 8-1 vote to hold rates at 4.50% last month, continues to restrain the Pound. While April’s CPI data showed a welcome decline, services CPI remains stubbornly high, keeping the MPC on edge. The slight widening of the US-UK 10Y yield spread to -38bp isn’t helping sentiment either, although the rise in FTSE 100 may provide the floor.

    • BoE Governor Bailey’s interview transcript will be parsed for any shifts in the central bank’s outlook.
    • UK unemployment ticking up to 5.0% in February is a potential warning sign that could sway the MPC to a more dovish stance if it continues.
    • Crowded short GBP positions – net non-commercials at -61,398 contracts – suggest that any positive surprise could trigger a squeeze.

    NY session focus: The main focus for the New York session will be the 10:00 ET ISM Manufacturing PMI release. A strong print above 53.3 could fuel further USD strength and weigh on Cable, while a miss could provide Sterling with a much-needed boost. We’ll also hear from FOMC Member Powell at 20:30 ET — any hawkish rhetoric would further pressure GBP/USD. Key levels to watch are 1.3440 for support and 1.3476 for resistance. The trade is to fade this rally and look for 1.3440, and the risk is to short the rally.

  • Yen Vulnerable as BoJ Rate Hike Bets Fade – Monday, 1 June

    Where we are: USD/JPY is currently trading at 159.52, up 0.10% on the day, consolidating near the upper end of its 159.31-159.53 intraday range. This marks a continued test of levels that have previously prompted intervention from Japanese authorities, and sits well above Friday’s NY close. The persistent upside pressure highlights the market’s skepticism about further imminent BoJ policy action and lingering carry appeal for USDJPY.

    What’s driving it: The primary driver for USD/JPY remains the perceived divergence between the BoJ’s slow normalisation path and the Fed’s comparatively hawkish stance. While the BoJ held rates steady at 0.50% at their last meeting and Ueda has flagged willingness to hike further, markets are unconvinced, especially as Friday’s capital spending numbers pointed to a slowdown in corporate investment, raising concerns about the strength of domestic economic momentum. Upward pressure on the DXY, currently at 99.06, is also contributing to Yen weakness, further supported by the US-JP 10Y yield spread remaining wide at +177bp.

    • BoJ’s slow normalisation bias despite wage data that consolidates the case for one more hike this year.
    • US-JP 10Y yield spread remains wide at +177bp, continuing to provide incentive for carry trades.
    • CFTC data shows a crowded short Yen positioning, with net non-commercial contracts at -114,667, near the 0th percentile (52w), suggesting squeeze risk on any positive JPY surprise.

    NY session focus: Today’s key events are the 10:00 ET ISM Manufacturing PMI and ISM Manufacturing Prices releases, followed by 20:30 ET remarks from FOMC Member Powell. Strong US data could fuel further USD strength and push USD/JPY higher, testing the 160.00 level. Conversely, weaker data may offer some relief to the Yen. Traders will also be closely watching for any signals from Japanese authorities regarding intervention. The trade that’s working is buying dips in USD/JPY; the trade at risk is shorting the Yen into US data. The pain trade for USD/JPY would be a surprisingly hawkish signal from the BoJ combined with a dovish surprise from the Fed.

  • Loonie Pressured as Macklem’s Tariff Concerns Weigh – Monday, 1 June

    Where we are: USD/CAD is currently trading at 1.3830, up 0.21% on the day and testing the upper end of its intraday range of 1.3790-1.3839. The pair is edging higher after consolidating near the 1.3800 level in the Asian and European sessions. The move puts USDCAD above Friday’s NY close.

    What’s driving it: The Bank of Canada’s persistent easing bias, coupled with Governor Macklem’s recent comments citing tariff uncertainty and softer growth, continues to weigh on the Canadian Dollar. While the recent GDP print remained relatively strong at 2.5% MoM, inflation figures remain a concern at 7.1% YoY, giving the BoC room to maintain its dovish stance. Firm WTI crude prices, up almost 1% at $89.79, are providing only limited support. The DXY is firmer at 99.06, contributing to the USDCAD bid.

    • The Bank of Canada held rates steady at 2.75% at its last meeting, but explicitly flagged tariff risks as a key concern, creating an overhang for CAD.
    • Canada’s 2s10s curve is relatively steep at +63bp, but the absolute level of Canadian yields remains low compared to the US, with the US-CA 10Y spread at +102bp favouring USD.
    • Speculative positioning in CAD is modestly short, but not at an extreme level (52nd percentile), suggesting limited squeeze potential.

    NY session focus: Today’s key event risk centers on the US ISM Manufacturing PMI at 10:00 ET. A strong print above the forecast of 53.3 could further buoy the USD and pressure USDCAD higher. FOMC Member Powell’s speech at 20:30 ET could also offer further insights into the Fed’s outlook and impact USD. Watch for a break above 1.3840, which could open the door to further gains. Conversely, a sharp risk-on move triggered by weak ISM data could see USDCAD test 1.3750. The pain trade here is a surprisingly hawkish shift from the BoC priced in quickly, sending USDCAD sharply lower.

  • Aussie Vulnerable as RBA Reluctance Meets Stronger USD – Monday, 1 June

    Snapshot: AUD/USD trades at 0.7167, down -0.15% intraday, as the RBA’s cautious stance contrasts with a strengthening US dollar. Upbeat copper prices (+2.42%) offer limited support. The key event for today is the 10:00 ET ISM Manufacturing PMI.

    • Watch AU 2Y yields at 4.566%; a break higher could signal further Aussie downside.
    • Risk: FOMC Member Powell speaks at 20:30 ET; hawkish comments may exacerbate AUD/USD weakness.

    Bias into NY: Short AUD/USD towards 0.7140. The RBA’s reluctance to signal rate cuts, as highlighted by Bullock’s “still uneven” inflation progress, is being overshadowed by the DXY’s rise to 99.06. US 10Y yields remain elevated at 4.452%.

  • USD/CHF Pressures 0.7850 as SNB Easing Bias Persists – Monday, 1 June

    Snapshot: USD/CHF trades at 0.7856, up 0.50% on the session, driven by the SNB’s active easing posture. The market continues to price in the potential for further rate cuts or FX intervention amid persistent CHF strength and near-zero CPI. Traders will be watching for the 10:00 ET ISM Manufacturing PMI release.

    • Watch for a break above intraday high of 0.7858; failure to do so may signal profit-taking.
    • Risk: Stronger-than-expected ISM Manufacturing print could exacerbate USD strength.

    Bias into NY: Bullish on USD/CHF while the SNB maintains an active easing bias, targeting a move towards 0.7900. The US-CH 10Y yield spread at +405bp continues to favour USD strength, adding to the domestic Swiss pressure.

  • Kiwi Weakness Persists on RBNZ Easing Bets – Monday, 1 June

    Snapshot: NZD/USD is currently trading at 0.5952, down 0.49% on the day, as markets continue to price in further easing from the RBNZ. Governor Orr’s recent signaling of additional cuts if disinflation takes hold remains the dominant driver, overshadowing a slightly firmer DXY. Focus shifts to the 10:00 ET ISM Manufacturing PMI print for any knock-on effects.

    • Key level to watch is the 0.5950 intraday low; a break could open the door to further downside.
    • Risk: An upside surprise in the ISM Manufacturing Prices component could trigger a risk-off move, exacerbating Kiwi weakness.

    Bias into NY: The bias remains skewed to the downside for NZD/USD as the market leans towards further RBNZ easing. A sustained break below 0.5950 would likely accelerate the move, potentially targeting 0.5900.

  • Aussie Vulnerable as RBA Rate Cut Bets Persist – Monday, 1 June

    Snapshot: AUD/USD trades at 0.7169, down 0.12% on the session, as markets remain unconvinced by the RBA’s hawkish hold. Australian yields are slightly firmer, with the 2Y at 4.564%, but this hasn’t provided sufficient support given the underlying dovish bias. Focus shifts to 10:00 ET ISM Manufacturing PMI.

    • Watch for a break below 0.7160; failure to hold this level could trigger a deeper slide as positioning remains moderately long.
    • Powell’s speech at 20:30 ET is a key risk; hawkish comments could amplify USD strength and pressure the Aussie further.

    Bias into NY: Expect continued downside pressure on AUD/USD. The RBA’s reluctance to signal a cut path contrasts with market pricing of a move later this year, and with a moderately long net speculative position in the Aussie, a break lower looks likely. The US-AU 10Y spread at -42bp favours USD strength into the NY session.