Category: Currencies

  • Swiss Franc Strength Persists on SNB Easing Hesitation – Monday, 18 May

    Snapshot: USD/CHF sits near 0.7847, down 0.25% from Friday. The Swiss Franc finds support in the SNB’s cautious approach to further easing, despite recent rate cuts. The market is pricing in continued vigilance from Schlegel and his team.

    • Watch for potential SNB FX intervention signals if USD/CHF tests lower towards 0.7800; Schlegel has kept negative rates on the table.
    • Rising US real yields could exert some downward pressure on the Swiss Franc if the US data prints strong, eroding CHF safe-haven appeal.

    Bias into NY: Bullish CHF. The SNB’s easing optionality, contrasted against broadly steady US yields, keeps USD/CHF pressured. Expect continued downward pressure on USD/CHF towards 0.7800.

  • Kiwi Under Pressure as RBNZ Easing Bias Remains – Monday, 18 May

    Snapshot: NZD/USD sits near $0.584, pressured by the RBNZ’s firmly intact easing bias and recent data pointing to weakening economic momentum. Orr signalled further easing at the last meeting if disinflation embeds, setting the stage for potential further downside. The next RBNZ meeting is on May 28.

    • Watch for any signs of imported inflation or currency weakness that could prompt the RBNZ to reconsider its easing stance.
    • Risk lies in stronger-than-expected US data during the NY session, which could further strengthen the USD and weigh on the Kiwi.

    Bias into NY: Downside favoured in NZD/USD as the RBNZ’s dovish stance continues to weigh, with a potential target near the recent two-week low. USD strength is supported by US 10Y real yields at 2%, creating a headwind for risk assets.

  • NY Session Tactical Brief – Friday, 15 May

    Regime: Risk-off, driven by rising oil prices and inflation worries spooking bond markets, pushing US 2Y yields to 3.98%.

    Today’s market themes:

    • Oil supply scare: Strait of Hormuz tensions driving WTI above $104, fueling inflation concerns.
    • Global bond selloff: Rising oil and inflation fears triggering broad-based bond yield increases.
    • USD strength: Dollar continues to rally on Fed hike expectations, nearing best week since March.

    The setup: Oil supply disruptions are the dominant driver, pushing inflation expectations higher and triggering a global bond selloff. The trade is to fade equity rallies, especially in growth names, as real yields rise. Risk is a de-escalation in Middle East tensions, sending oil and yields lower.

    Watch list (native time per event):

    • 08:30 ET US PPI (Prior: +0.2%)
    • 10:00 ET US University of Michigan Consumer Sentiment (Prior: 77.2)
    • 15:00 CET ECB’s Lagarde speaks

    Bias by asset:

    • DXY:
      • Direction: Bullish
      • Domestic (US): Hawkish Fed bets, resilient US data, rising US yields.
      • Cross: Global risk aversion, flight to safety, EUR/USD weakness.
      • Levels: Support 98.50, Resistance 99.50
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): Dovish ECB, persistent inflation challenges, peripheral stress.
      • Cross: Strong DXY, widening US-DE 10Y yield spread, risk-off sentiment.
      • Levels: Support 1.1600, Resistance 1.1700
    • GBP/USD (Cable):
      • Direction: Bearish
      • Domestic (UK): BoE hawkishness priced in, potential for dovish repricing, Gilt underperformance.
      • Cross: Strong DXY, widening US-UK 10Y yield spread, risk aversion.
      • Levels: Support 1.3350, Resistance 1.3450
    • USD/JPY:
      • Direction: Neutral
      • Domestic (JP): BoJ remains dovish, intervention threat looms, JGBs constrained.
      • Cross: Rising US 10Y yield, strong DXY, risk aversion.
      • Levels: Support 157.50, Resistance 158.50
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC’s cautious stance, CPI remains elevated, sensitive to oil price swings.
      • Cross: Strong DXY, widening US-CA 10Y yield spread.
      • Levels: Support 1.3650, Resistance 1.3750
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): RBA reluctance to tighten aggressively, iron ore price concerns.
      • Cross: Strong DXY, China slowdown fears, risk-off sentiment.
      • Levels: Support 0.7150, Resistance 0.7250
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ easing bias firmly entrenched, Dairy prices remain weak.
      • Cross: Strong DXY, risk aversion.
      • Levels: Support 0.5800, Resistance 0.5900
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB likely to maintain dovish stance, moderate Swiss yields.
      • Cross: Strong DXY, risk aversion driving safe-haven flows out of CHF.
      • Levels: Support 0.7800, Resistance 0.7900
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Bearish, EUR/JPY: Bearish, GBP/JPY: Neutral
      • Domestic: BoE remains relatively more hawkish than ECB/BoJ, yield divergence supports GBP.
      • Cross: DXY strength, risk aversion, cross-of-crosses flows impacting correlations.
      • Levels: EUR/GBP: R: 0.8550 S: 0.8500; EUR/JPY: R: 171.00 S: 170.50; GBP/JPY: R: 193.00 S: 192.50
    • XAU (Gold):
      • Direction: Bearish
      • Domestic (asset-specific): Rising real yields, lower breakevens weighing on gold.
      • Cross: Strong DXY, risk-off sentiment limited support.
      • Levels: Support $4,575, Resistance $4,600
    • XAG (Silver):
      • Direction: Bearish
      • Domestic (asset-specific): Weak industrial demand, Gold-Silver ratio trending higher.
      • Cross: Strong DXY, risk aversion exacerbating downside.
      • Levels: Support $4,450, Resistance $4,500
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Strait of Hormuz tensions, potential supply disruptions, inventories tight.
      • Cross: Weaker DXY providing some offset to risk-off flows.
      • Levels: WTI: S: $102, R: $105; Brent: S: $106, R: $109
    • Copper:
      • Direction: Bearish
      • Domestic (asset-specific): China growth concerns, LME stocks elevated, supply outlook improving.
      • Cross: Strong DXY, risk-off sentiment weighing on industrial metals.
      • Levels: Support $9,800, Resistance $10,000
    • SPX:
      • Direction: Bearish
      • Domestic (US): Rising real yields, concerns about future earnings growth.
      • Cross: Elevated VIX, global risk-off sentiment weighing on equities.
      • Levels: Futures: Support 5220, Resistance 5280
    • NDX:
      • Direction: Bearish
      • Domestic (US): Real yield sensitivity, mega-cap valuations stretched, AI hype fading.
      • Cross: Rates sensitivity, elevated VIX indicating heightened volatility.
      • Levels: Support 19500, Resistance 19700
    • US30 (Dow):
      • Direction: Bearish
      • Domestic (US): Concerns about future earnings growth, pressure on cyclical sectors.
      • Cross: Rising bond yields impacting valuations.
      • Levels: Support 39500, Resistance 40000
    • UK100 (FTSE):
      • Direction: Bearish
      • Domestic (UK): Stronger Sterling weighing, Gilt yields rising, commodity sector under pressure.
      • Cross: Global risk aversion, US tone dragging on sentiment.
      • Levels: Support 8350, Resistance 8400
    • DAX:
      • Direction: Bearish
      • Domestic (DE): Rising Bund yields, weak IFO/ZEW survey data, EU growth concerns.
      • Cross: US tech weakness, DXY strength, risk-off sentiment.
      • Levels: Support 24100, Resistance 24300
    • Nikkei:
      • Direction: Bearish
      • Domestic (JP): Stronger JPY weighing, BoJ under pressure to act, JGB yield curve flattening.
      • Cross: US tech weakness, risk aversion.
      • Levels: Support 38500, Resistance 39000
    • BTC:
      • Direction: Bearish
      • Domestic (asset-specific): Elevated funding rates, ETF flows slowing, on-chain metrics mixed.
      • Cross: Strong DXY, risk aversion, Nasdaq correlation weighing on sentiment.
      • Levels: Support $61,000, Resistance $63,000

    Positioning watch: AUD and Bitcoin are crowded longs (>95th percentile) vulnerable to disappointment if risk aversion intensifies or data disappoints, creating squeeze risk. JPY is a crowded short (<15th percentile) and could rally hard if the BoJ surprises or intervention occurs.

    The pain trade: A de-escalation in Middle East tensions, leading to a sharp drop in oil prices and a rally in risk assets, would hurt crowded short positions in bonds and crowded long positions in the dollar.

  • Dollar Set for Best Week Since March – Friday, 15 May

    Where we are: The DXY currently trades around 99.00, near the upper end of its overnight range. This marks a significant move higher from yesterday’s New York close, and puts the Dollar on track for its best weekly performance since March. Key resistance lies at the 99.20 level, a break of which could trigger further upside.

    What’s driving it: Mounting inflationary pressures in the US are solidifying expectations for a potential Fed rate hike later this year. Even though the Fed has maintained a patient hold, reaffirming its data-dependent stance, the market is reacting to sticky inflation data and resilient consumer demand. The recent wholesale and consumer price data fueled these hawkish expectations. Hawkish overnight comments from Fed officials Barr and Bowman added conviction to the view that balance sheet shrinking is no longer the main priority.

    • The US 2Y yield closed at 3.98% on Tuesday, down 2bp on the day.
    • The dollar index is on track to post a weekly gain of more than 1%.
    • CFTC data shows net non-commercial positions in the US Dollar are at +693 contracts, near the 83rd percentile of their 52-week range. This crowded long positioning raises the risk of a squeeze on any dovish surprises.

    NY session focus: All eyes will be on any further commentary emerging from the high-level talks between President Trump and Chinese President Xi Jinping. We are watching for any explicit mention of the Dollar or trade disputes. Key levels to watch are 99.20 on the upside and 98.75 on the downside. The trade that’s working is fading dips in the dollar, given the strong momentum. The risk lies in a surprise dovish turn from the Fed, despite recent data. The pain trade is a sharp reversal in the DXY towards 98.00 if the market misinterprets the data.

  • Euro Under Pressure Amidst Geopolitical Risks – Friday, 15 May

    Where we are: EUR/USD is trading around 1.1640, testing lows not seen since early April. The pair has traded in a tight range overnight, generally pressured, and is below yesterday’s New York close. Key support lies at 1.1630, a break of which could open the way to further downside. Resistance is seen at 1.1680, previous support.

    What’s driving it: The Euro is struggling to find its footing as the market digests the ECB’s mild easing bias and recent softer inflation prints against a backdrop of escalating geopolitical tensions. While the ECB cut rates by 25bp at its last meeting, the “meeting-by-meeting” language leaves the door open for either further cuts or a pause depending on incoming data. Renewed concerns about the conflict in Ukraine, highlighted by the deadly attack in Kyiv, are weighing on sentiment and boosting safe-haven flows. We see increasing risk that the ECB will pause its easing cycle given the sensitivity to geopolitical risks.

    • The ECB has a mild easing bias but is data-dependent, as evidenced by the “meeting-by-meeting” language.
    • Eurozone HICP came in at 2%, down from 2.1% prior, but the market has largely priced this in.
    • Net non-commercial Euro positioning is modestly long at +32,202 contracts, near the 10th percentile, suggesting limited scope for further long liquidation and potential for a short squeeze if the narrative shifts.

    NY session focus: The market will be closely watching risk sentiment for cues. Any escalation in Ukraine will likely weigh on the Euro. Keep an eye on US 2Y yields, currently at 3.98%, for further direction; a break above 4% could add downward pressure to EUR/USD. Key level to watch is 1.1630; a sustained break lower could trigger a move towards 1.1600. Today’s data releases are light. The trade that’s working is selling EUR/USD on rallies. The pain trade for Euro would be a de-escalation of geopolitical tensions coupled with hawkish rhetoric from ECB officials.

  • Sterling Under Pressure as Political Risks Rise – Friday, 15 May

    Where we are: GBP/USD is trading near 1.3385, testing lows not seen since early April. Overnight, Cable ranged between 1.3370 and 1.3430, remaining on the defensive. The pair is trading notably below the previous New York close, weighed down by concerns about UK political stability and a broad risk-off sentiment.

    What’s driving it: The pound is under pressure primarily due to growing domestic political uncertainty and its potential impact on fiscal policy. Concerns are mounting that Andy Burnham may challenge Keir Starmer, raising the spectre of looser borrowing limits and higher gilt yields; the UK 10-year yield has already hit its highest level since 2008. This downside is compounded by Trump’s comments pushing crude oil higher, fuelling inflation worries and necessitating further BoE rate hikes, of which the market already anticipates 70bp this year. The US 2Y yield is modestly lower at 3.98%, failing to offer Cable any respite.

    • UK 10-year gilt yields reaching levels not seen since 2008 indicates substantial market anxiety regarding UK fiscal outlook.
    • CFTC data reveals a crowded net-short positioning in GBP, with -63,908 contracts representing the 15th percentile, increasing the risk of a squeeze.
    • The Bank of England’s cautious stance, demonstrated by an 8-1 vote to hold rates steady at 4.50% at their last meeting, is failing to support the currency amid political turbulence.

    NY session focus: Traders will be closely monitoring any further developments regarding the UK political situation, along with broader risk sentiment driven by news flow out of the US. The 08:30 ET US data dump will provide short term direction. Key levels to watch are 1.3350 on the downside and 1.3430 as initial resistance. The short Sterling trade is currently working, while any long Cable positions are under considerable pressure. The pain trade would be a hawkish surprise from Huw Pill reversing the Sterling weakness.

  • Yen Resilience Tested as BoJ Hawks Circle – Friday, 15 May

    Where we are: USD/JPY is currently trading around 158.30, consolidating after a choppy overnight session. The pair remains elevated after testing resistance near 158.80 earlier in the week, and is holding above the psychological 158.00 level. The overnight range has been relatively contained between 157.90 and 158.45, leaving it roughly unchanged versus yesterday’s NY close.

    What’s driving it: The BoJ’s slow normalisation bias continues to underpin Yen sentiment, even as dollar strength persists. Board Member Masu’s speech highlighting the need for prompt interest rate hikes to combat persistent inflation risks stemming from the Iran war is resonating with markets. This hawkish rhetoric is supported by the spring shunto wage data, which consolidates the case for at least one more rate hike this year. However, the relentless pressure from USD strength and persistently high oil prices are providing significant headwinds to any sustained Yen appreciation.

    • The BoJ’s last decision on March 19th, holding rates at 0.50% while flagging further hikes if the outlook tracks projections, keeps a hawkish bias simmering.
    • CFTC data shows a crowded net-short JPY position (-61,738 contracts, 13th percentile), increasing the risk of a violent squeeze on any positive Yen catalyst.
    • Alphabet’s record Yen bond issuance highlights continued demand for Yen-denominated assets, potentially offering some support amidst broader weakness.

    NY session focus: All eyes will be on US data prints this morning, though without any directly conflicting Japanese data to act as a counterweight, these will likely be the dominant drivers. Watch for reactions around 158.00; a break below could trigger a short-covering rally, while a sustained move above 158.80 opens the door to further USD/JPY upside. The trade at risk is selling JPY based solely on carry, given the looming threat of BoJ intervention and the crowded short positioning. The pain trade here remains a rapid JPY appreciation, fueled by a risk-off event or a surprise BoJ policy shift, forcing a massive short squeeze.

  • CAD Under Pressure as BoC Easing Bias Remains – Friday, 15 May

    Where we are: USDCAD is currently trading around 1.3715, testing the upper end of its overnight range. This level marks a modest extension from the prior NY close, with resistance building at the 1.3730 level. Overall, the pair is showing signs of upward momentum, particularly after consolidating around the 1.3650 mark earlier in the week.

    What’s driving it: The Canadian dollar is facing headwinds from the Bank of Canada’s (BoC) continued easing bias, even as recent domestic data offers a mixed picture. While monthly GDP surprised to the upside at 2.6%, inflation remains stubbornly above target at 7.1%, but Macklem’s comments following the last meeting on April 16th highlighted ongoing concerns about tariff uncertainty and a potentially softer growth path, keeping the door open to future rate cuts. Rising US yields are adding additional pressure, with the US 2Y yield hovering around 3.98%, making the greenback more attractive relative to the Loonie.

    • BoC Governor Macklem has explicitly stated that further easing is data-contingent, hinging on domestic demand softness and inflation trends.
    • CFTC data reveals a modestly short net non-commercial CAD position of -14,659 contracts, albeit at the 83rd percentile, suggesting some potential for a short squeeze if the narrative shifts.
    • The weaker Canadian labor market reported in April, with a 17k job loss and unemployment rising to 6.9%, continues to weigh on sentiment despite the robust GDP figure.

    NY session focus: With no major Canadian data releases scheduled today, the focus will remain on US dollar dynamics and broader risk sentiment. Keep an eye on any developments in the WTI crude oil market, given its historical correlation with the Canadian dollar. Key levels to watch are 1.3680 for support and 1.3750 for resistance; a break above this could trigger further CAD weakness. The trade that’s working is short USDCAD on dips to 1.3680 but the trade at risk is long USDCAD without a break of 1.3750. The pain trade for USDCAD would be a sharp rally in oil prices, forcing a rapid short squeeze on existing CAD shorts.

  • Aussie Vulnerable on Crowded Longs, Uneven Inflation – Friday, 15 May

    Snapshot: AUD/USD trades around $0.72, pressured by USD strength but primarily vulnerable to a squeeze given the crowded long positioning and RBA’s reluctance to commit to rate cuts. Bullock’s recent comments about inflation progress being “still uneven” highlight the RBA’s cautious stance. No domestic data catalysts until the RBA meeting on the 20th.

    • Watch for a break below $0.7180, which could trigger a deeper correction given the stretched positioning.
    • Risk: Any hawkish repricing of the Fed could amplify AUD weakness.

    Bias into NY: Short AUD/USD. The crowded long positioning combined with the RBA’s cautious stance and the potential for a stronger USD suggest further downside, targeting $0.7150. A soft Q1 trimmed-mean CPI would alleviate some pressure, but that’s not yet in sight.

  • USD/CHF to Remain Under Pressure – Friday, 15 May

    Snapshot: USD/CHF sits at 0.7870, up 0.43% from the previous session. The Swiss Franc continues to draw strength from the SNB’s active easing stance and persistent concerns about disinflation. All eyes are on any further signals from SNB officials regarding future policy adjustments.

    • Watch for a break below 0.7850 as a signal of further CHF strength.
    • Risk of SNB intervention to curb CHF appreciation remains a constant possibility, particularly if the Franc strengthens too rapidly.

    Bias into NY: We expect continued downward pressure on USD/CHF as the market anticipates further easing from the SNB, potentially targeting 0.7820. US 2Y yields are down slightly, but the primary driver remains the SNB’s posture.

  • Kiwi Remains Heavy on RBNZ Easing Bias – Friday, 15 May

    Snapshot: NZD/USD grinds near $0.585, pressured by the firmly entrenched RBNZ easing bias. Last month’s 25bp rate cut to 3.50% and Governor Orr’s signal of further cuts if disinflation embeds remains the dominant driver. No fresh domestic data to shift the dial today.

    • Watch for support near $0.5825, a break of which opens the door to further downside.
    • Global inflation worries, as highlighted by climbing bond yields, could present upside risks to the Kiwi if it prompts a RBNZ rethink.

    Bias into NY: Bearish on NZD/USD. The RBNZ’s dovish stance provides a strong headwind, and crowded short positioning reduces, but doesn’t eliminate, the risk of a squeeze. We look for Kiwi to test, then break $0.5825 this session.

  • NY Session Tactical Brief – Thursday, 14 May

    Regime: Mixed; VIX at 17.99 with US yields rising slightly and the DXY consolidating gains around 118.15 indicates a tentative risk-neutral stance.

    Today’s market themes:

    • Trump-Xi meeting impact: assessing US-China trade and oil relationship, especially regarding Iran sanctions.
    • US Retail Sales: markets are awaiting direction with Retail Sales release.
    • Crowded trades: the market is set up for a potential short squeeze, with several currencies and asset classes showing heavily skewed positioning.

    The setup: Traders are positioned for USD strength and are short GBP, JPY, and NZD. US retail sales data will be key to either confirming this bias or triggering a squeeze. Watch US 10Y yields; sustained move above 4.5% could exacerbate USD strength.

    Watch list (native time per event):

    • 07:00 London GBP: GDP m/m (forecast -0.1%, prior 0.5%)
    • 08:30 ET USD: Core Retail Sales m/m (forecast 0.7%, prior 1.9%)
    • 08:30 ET USD: Retail Sales m/m (forecast 0.5%, prior 1.7%)

    Bias by asset:

    • DXY:
      • Direction: Neutral
      • Domestic (US): Data dependent on Retail Sales, Fed policy on inflation.
      • Cross: Risk sentiment / global growth outlook drive flows
      • Levels: Support 117.80 / Resistance 118.30
    • EUR/USD:
      • Direction: Neutral
      • Domestic (EU): ECB rhetoric, EU data release sensitive to global narrative.
      • Cross: DXY strength, US-DE 10Y spread.
      • Levels: Support 1.1680 / Resistance 1.1740
    • GBP/USD (Cable):
      • Direction: Bearish
      • Domestic (UK): GDP print spurring rate cut bets, Gilt yield declines.
      • Cross: DXY strength / US-UK 10Y widening
      • Levels: Support 1.2450 / Resistance 1.2520
    • USD/JPY:
      • Direction: Bullish
      • Domestic (JP): BoJ’s hawkish tone not enough to combat carry demand.
      • Cross: US 10Y strength / risk-on / intervention watch
      • Levels: Support 157.50 / Resistance 158.00
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC policy path, oil price fluctuations are the driver.
      • Cross: DXY strength / US-CA 10Y differential.
      • Levels: Support 1.3680 / Resistance 1.3740
    • AUD/USD (Aussie):
      • Direction: Neutral
      • Domestic (AU): RBA policy path / key commodity prices affecting sentiment.
      • Cross: DXY correlation, China growth, US-AU 10Y
      • Levels: Support 0.7170 / Resistance 0.7230
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ dovish stance is the driver.
      • Cross: DXY direction, Risk / US-NZ 10Y
      • Levels: Support 0.5900 / Resistance 0.5950
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB’s easing policy stance.
      • Cross: DXY strength, safe-haven demand fluctuation.
      • Levels: Support 0.7800 / Resistance 0.7850
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP Neutral, EUR/JPY Neutral, GBP/JPY Bearish
      • Domestic: Rate spreads/relative central bank stance
      • Cross: Risk, cross-of-crosses
      • Levels: Watch relative breaks; range trades
    • XAU (Gold):
      • Direction: Neutral
      • Domestic (asset-specific): Real yields are the driver.
      • Cross: DXY influence, risk sentiment.
      • Levels: Support 4670 / Resistance 4700
    • XAG (Silver):
      • Direction: Neutral
      • Domestic (asset-specific): Gold-Silver ratio influences direction.
      • Cross: DXY influence, risk correlation.
      • Levels: Support 30.40 / Resistance 30.70
    • WTI / Brent:
      • Direction: Neutral
      • Domestic (asset-specific): Supply/demand influences, WTI-Brent Spread affects trend.
      • Cross: DXY influence, risk sentiment.
      • Levels: Support 100.50 / Resistance 102.50
    • Copper:
      • Direction: Neutral
      • Domestic (asset-specific): China growth outlook is the main driver.
      • Cross: Global growth sentiment.
      • Levels: Support 5.00 / Resistance 5.10
    • SPX:
      • Direction: Bullish
      • Domestic (US): Earnings, Fed policy influences market direction.
      • Cross: Risk regime, Global Tone, yields correlation.
      • Levels: Futures level Support 5330 / Resistance 5350.
    • NDX:
      • Direction: Bullish
      • Domestic (US): Mega-cap earnings are a major factor.
      • Cross: Rates / Volatility (VIX).
      • Levels: Support 18,750 / Resistance 18,850
    • US30 (Dow):
      • Direction: Bullish
      • Domestic (US): Industrial / Financial earnings support this.
      • Cross: Bond yield / overall market tone affecting direction.
      • Levels: Support 50,000 / Resistance 50,250
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Domestic-centric influences such as Sterling performance.
      • Cross: Market Sentiment / US tone impacting direction.
      • Levels: Support 8,400 / Resistance 8,450
    • DAX:
      • Direction: Bullish
      • Domestic (DE): Domestic sentiment and yields.
      • Cross: US tech impacts, DXY correlation.
      • Levels: Support 24,350 / Resistance 24,450
    • Nikkei:
      • Direction: Neutral
      • Domestic (JP): JPY impacts, BOJ policy stance.
      • Cross: US tech influence, global risk factors.
      • Levels: Support 38,800 / Resistance 39,200
    • BTC:
      • Direction: Neutral
      • Domestic (asset-specific): ETF flow / on-chain metrics drive direction.
      • Cross: Risk sentiment & Nasdaq performance impact.
      • Levels: Support 61,500 / Resistance 62,500

    Positioning watch: AUD/USD, Copper, and Bitcoin are crowded longs, creating squeeze risk if data disappoints; GBP, JPY, and NZD are crowded shorts, vulnerable to upside surprises. CFTC shows dollar index positioning very stretched.

    The pain trade: A dovish tilt from the Fed combined with strong UK data and a resolution of Iran tensions would trigger a massive short squeeze in GBP, JPY, NZD, Gold, and rates.

  • Dollar Grinds Higher as Warsh Era Begins – Thursday, 14 May

    Where we are: The dollar index is trading near 118.15 in early New York trading, consolidating gains after a firmer overnight session. The DXY continues to benefit from the hawkish repricing, hovering near its highest levels since last week. Key resistance remains at 118.50, with support around 117.80, roughly where it closed yesterday in New York.

    What’s driving it: The confirmation of Kevin Warsh as Fed Chair is the primary driver, stoking expectations for a more aggressive stance on inflation. The market is now fully pricing out any Fed rate cuts this year, and increasingly pricing in a rate hike, fueling the bid for the Greenback. The rise in US 2Y yields to 4% and 10Y yields to 4.46% continues to support the dollar, especially with real yields on TIPS pushing higher to 1.99%, adding pressure to gold. The Trump-Xi summit is adding a layer of uncertainty, but so far the market is focused on the domestic inflation picture and the Fed’s likely response.

    • The 2s10s spread widened by 2bp to 0.48%, reflecting increased term premium.
    • CFTC data shows net non-commercial USD positioning at +693 contracts, but it is still in the 83rd percentile. Given how crowded that long positioning is, there is squeeze risk on any disappointment in the data.
    • The nomination of Warsh itself implies more rate hikes could be priced in, increasing support for USD

    NY session focus: The focus is squarely on the 08:30 ET Retail Sales and Unemployment Claims releases. A strong print in either will reinforce the hawkish narrative and likely push the dollar higher, potentially testing 118.50. Weaker data, however, opens the door to a squeeze on those crowded USD longs. Pay close attention to the market’s reaction to the numbers. The trade continues to be long USD vs EUR or JPY, but the risk is that this gets faded quickly on a dovish surprise. The pain trade is a surprisingly weak inflation print that sparks a rapid unwinding of hawkish Fed bets.

  • Euro Vulnerable to US Retail Sales Data – Thursday, 14 May

    Where we are: EUR/USD is trading around 1.1705, holding above yesterday’s close but still capped by the recent three-week high seen last week. The overnight range has been relatively tight, between 1.1690 and 1.1720. A break below 1.1680 would signal a potential retest of the 1.1650 level, while a push above 1.1730 opens the door to 1.1750.

    What’s driving it: The Euro remains sensitive to ECB policy signals after the recent 25bp rate cut to 2.50%. The market is pricing in a near 90% chance of a June rate hike, with three hikes almost fully priced in by the end of 2026. However, the path is not straightforward. ECB speakers like Kazaks are flagging concerns about oil price impacts on inflation expectations, hinting at potential hawkish pushback. The rising US 10Y real yield, now at 1.99%, is a headwind for Euro upside.

    • The mild easing bias preserved in the ECB’s last decision leaves the Euro vulnerable to positive US data surprises, especially given the market’s hawkish pricing.
    • Speculative positioning in the Euro is modestly long, at +32,202 contracts, but this is only at the 10th percentile on a 52-week lookback, suggesting there is limited fuel for a squeeze higher.
    • The rising US 10Y real yield suggests that USD is attractive versus EUR.

    NY session focus: Today’s 08:30 ET release of US Core Retail Sales and Retail Sales m/m will be the key catalyst. A strong print would reinforce expectations of continued Fed hawkishness and likely pressure EUR/USD lower. Watch for initial support at 1.1680, then 1.1650. Conversely, a weak print could see a short squeeze towards 1.1730. The trade that’s working is fading Euro strength, while the trade at risk is being short Euro into a weak US data print. The pain trade for EUR/USD is a surprisingly dovish ECB pivot combined with a US recession scare.

  • Cable Pressured by Political Risk Despite UK GDP Surprise – Thursday, 14 May

    Where we are: GBP/USD is currently trading around 1.2480, hovering near its weakest level since late April. The pair traded in a tight overnight range of 1.2460-1.2500, and is slightly below yesterday’s New York close of 1.2495. The 1.2450 level remains key support, with a break opening the door to further declines.

    What’s driving it: Despite a better-than-expected UK GDP print this morning (0.6% q/q vs 0.1% prior), Sterling is struggling under the weight of mounting political uncertainty following Wes Streeting’s resignation and potential leadership challenge. This overshadows the positive macro data, highlighting the market’s sensitivity to domestic political risks. The Bank of England’s cautious stance, reflected in the recent 8-1 vote to hold rates steady, provides little support, as the MPC remains data-dependent and reluctant to commit to a cut path. Rising US Treasury yields, with the 2Y at 4% and the 10Y at 4.46%, are also weighing on Cable.

    • UK GDP m/m came in at 0.5% vs. -0.1% forecast, indicating unexpected strength in the economy.
    • Political uncertainty escalates with the likely leadership challenge against PM Starmer, increasing pressure on the Pound.
    • CFTC data reveals a crowded short positioning in GBP, with net non-commercial positions at -63,908 contracts, a potential squeeze risk if positive news emerges.

    NY session focus: All eyes are now on the 08:30 ET US Retail Sales data. Strong prints could further bolster the dollar and pressure Cable lower, while a miss could offer some respite. We’ll also be watching US Unemployment Claims at 08:30 ET. Key levels to watch are 1.2450 on the downside and 1.2520 as initial resistance. The trade that’s working is fading any Cable rallies into USD strength. The trade at risk is a short squeeze fuelled by weaker-than-expected US data. The pain trade is Cable breaking above 1.2550 and running towards 1.2600 as political risk recedes.