Category: Currencies

  • USD/CHF Drifts Higher as SNB Easing Bias Remains – Monday, 11 May

    Snapshot: USD/CHF trades at 0.7786, up 0.14% on the session, as the SNB’s recent rate cut and stated readiness to intervene in FX markets continues to weigh on the Swiss Franc. No major Swiss macro prints are due today.

    • Watch for SNB comments reinforcing their easing bias; further hints of negative rate optionality would pressure the Swissy.
    • Global risk sentiment, as reflected in US equity futures, could provide a tailwind if the bid persists into the NY session.

    Bias into NY: We see continued upside for USD/CHF towards 0.7800 given the SNB’s proactive approach to combatting disinflation and CHF strength. A stronger dollar, supported by slightly higher US yields, may amplify the move.

  • Kiwi Under Pressure as RBNZ Easing Bias Remains – Monday, 11 May

    Snapshot: NZD/USD trades at 0.5949, down 0.03% on the session, as the RBNZ’s dovish stance continues to weigh. With the central bank signalling further easing if disinflation embeds, the Kiwi remains vulnerable. Today’s medium-impact CNY CPI and PPI prints may offer a short-term distraction, but the dominant driver is domestic.

    • Watch 0.5939, the day’s low; a break could signal further downside.
    • Be wary of a crowded short position; any hawkish surprises could trigger a sharp squeeze.

    Bias into NY: Short NZD/USD below 0.5950 remains the base case, driven by the RBNZ’s firmly entrenched easing bias. A modest lift in US 10Y yields to 4.393% and a slightly firmer DXY at 97.87 add pressure, but domestic policy is the key influence.

  • NY Session Tactical Brief – Friday, 8 May

    Regime: Risk-on, as equity futures surge on hopes of softer US payrolls and bond yields drift lower (US 10Y at 4.357%).

    Today’s market themes:

    • US Payrolls showdown: markets bracing for a potential dovish surprise amid a crowded USD long positioning.
    • Iran tensions: Oil prices remain volatile amid geopolitical instability and supply concerns.
    • Central Bank Divergence: Focus on Lagarde and Bailey speeches while watching BoJ comments regarding JPY.

    The setup: The market is pricing in a weaker-than-expected US jobs report, fueling a rally in risk assets. The crowded USD long position leaves room for a significant squeeze if the data disappoints. Watch US 10Y yield response to payrolls and the DXY level around 97.77.

    Watch list (native time per event):

    • 08:30 ET USD: Non-Farm Employment Change (forecast 65K, prior 178K)
    • 08:30 ET CAD: Employment Change (forecast 12.9K, prior 14.1K)
    • 13:20 London GBP: BOE Gov Bailey Speaks

    Bias by asset:

    • DXY:
      • Direction: Bearish.
      • Domestic (US): Fed policy outlook dependent on US data, especially labor market.
      • Cross: Risk sentiment dependent on USD strength, FX cross flows.
      • Levels: Support at 97.50, resistance at 98.20.
    • EUR/USD:
      • Direction: Bullish.
      • Domestic (EU): ECB’s rhetoric, core inflation and German Bund yields.
      • Cross: DXY weakness, US-DE 10Y spread favoring EUR, positive risk sentiment.
      • Levels: Support at 1.1700, resistance at 1.1800.
    • GBP/USD (Cable):
      • Direction: Bullish.
      • Domestic (UK): BoE policy guidance, Gilt yields, services CPI.
      • Cross: DXY weakness, US-UK 10Y spread, risk on sentiment.
      • Levels: Support at 1.3550, resistance at 1.3650.
    • USD/JPY:
      • Direction: Neutral.
      • Domestic (JP): BoJ policy, JGB yield curve control, intervention threat.
      • Cross: US 10Y yields, DXY direction, risk appetite.
      • Levels: Support at 156.00, resistance at 157.00.
    • USD/CAD (Loonie):
      • Direction: Neutral.
      • Domestic (CA): BoC policy, Employment change data and WTI correlation.
      • Cross: DXY direction, US-CA 10Y yield spread.
      • Levels: Support at 1.3600, resistance at 1.3700.
    • AUD/USD (Aussie):
      • Direction: Bullish.
      • Domestic (AU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY weakness, US-AU 10Y spread, China growth outlook.
      • Levels: Support at 0.7200, resistance at 0.7250.
    • NZD/USD (Kiwi):
      • Direction: Bullish.
      • Domestic (NZ): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY weakness, US-NZ 10Y spread, risk appetite.
      • Levels: Support at 0.5900, resistance at 0.5975.
    • USD/CHF (Swissy):
      • Direction: Bearish.
      • Domestic (CH): SNB stance and Swiss yield curve.
      • Cross: DXY weakness, safe-haven demand.
      • Levels: Support at 0.7750, resistance at 0.7810.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Neutral, EUR/JPY: Bullish, GBP/JPY: Bullish.
      • Domestic: Relative CB policy, relative yield spreads drive direction.
      • Cross: DXY, risk regime, cross-of-crosses dynamics.
      • Levels: Watch key technical levels, sensitive to GBP and JPY crosses.
    • XAU (Gold):
      • Direction: Bullish.
      • Domestic (asset-specific): Real yields trending lower, rising breakevens, central bank demand.
      • Cross: DXY weakness, risk-off sentiment.
      • Levels: Support at 4700, resistance at 4750.
    • XAG (Silver):
      • Direction: Bullish.
      • Domestic (asset-specific): Industrial demand expectations, gold-silver ratio.
      • Cross: DXY weakness, risk appetite.
      • Levels: Support at 8100, resistance at 8200.
    • WTI / Brent:
      • Direction: Mixed.
      • Domestic (asset-specific): Iran tensions, EIA inventory data, OPEC output levels.
      • Cross: DXY, risk sentiment.
      • Levels: Watch inventory reports, supply disruptions.
    • Copper:
      • Direction: Bullish.
      • Domestic (asset-specific): Positive China growth outlook, LME stocks, supply issues.
      • Cross: DXY, global growth.
      • Levels: Support at 625, resistance at 635.
    • SPX:
      • Direction: Bullish.
      • Domestic (US): Earnings season, Fed policy outlook, US yield reaction.
      • Cross: VIX suppression, global sentiment.
      • Levels: Futures resistance at 7420, cash support 7330.
    • NDX:
      • Direction: Bullish.
      • Domestic (US): Mega-cap tech earnings, real yields and AI investments.
      • Cross: Rates sensitivity, low VIX environment.
      • Levels: Support at 28800, resistance at 29000.
    • US30 (Dow):
      • Direction: Bullish.
      • Domestic (US): Industrial earnings, cyclical sentiment.
      • Cross: Bond yields response.
      • Levels: Support at 49500, resistance at 50000.
    • UK100 (FTSE):
      • Direction: Neutral.
      • Domestic (UK): No fresh domestic catalyst — sensitive to US response.
      • Cross: Global risk, and US macro performance.
      • Levels: Support at 22800, resistance at 22950.
    • DAX:
      • Direction: Neutral.
      • Domestic (DE): German Bund yields and broader Eurozone sentiment.
      • Cross: US Tech, DXY, risk appetite.
      • Levels: Support at 24400, resistance at 24550.
    • Nikkei:
      • Direction: Neutral.
      • Domestic (JP): JPY strength sensitivity, JGB yields, BoJ policy.
      • Cross: US tech, global risk appetite.
      • Levels: Support at 62500, resistance at 62800.
    • BTC:
      • Direction: Neutral.
      • Domestic (asset-specific): ETF inflows, on-chain activity, funding rate.
      • Cross: DXY direction, risk sentiment, and Nasdaq correlation.
      • Levels: Support at $79,000, resistance at $80,500.

    Positioning watch: USD, AUD and BTC are crowded longs, S&P, Nasdaq, GBP, JPY and NZD are crowded shorts. A strong payrolls number will amplify the USD short squeeze while a weak number risks a violent short squeeze in GBP, JPY and Nasdaq.

    The pain trade: A strong US jobs report would trigger a massive USD rally, crush risk assets, and inflict maximum pain on the crowded short positions in GBP, JPY and tech stocks.

  • Dollar Under Pressure as Yields Dip on Iran Ceasefire – Friday, 8 May

    Where we are: The DXY currently trades at 97.77, down 0.35% on the day, having traded in a range of 97.75-98.17. The dollar is testing ten-week lows amidst a broad risk-on move. We see scope for further weakness if today’s US data misses, potentially targeting 97.50.

    What’s driving it: A tentative ceasefire with Iran is driving a risk-on bid across markets, easing concerns about energy supply disruptions through the Strait of Hormuz and weighing on the dollar. Domestically, the market is heavily focused on today’s 08:30 ET payrolls print. The Fed remains in a patient hold pattern, contingent on further disinflation in core services and cooling labour costs; this puts even greater weight on today’s employment data, especially Average Hourly Earnings.

    • The 10-year real yield (TIPS) has fallen to 1.94%, underpinning the bid in gold and reflecting expectations of future Fed easing.
    • Speculative positioning in the dollar remains crowded long (92nd percentile), creating squeeze risk if the data disappoints.
    • US 2Y and 10Y yields are both down around 2-3 bps pre-data, signalling a market pricing in a higher chance of weaker data.

    NY session focus: Today’s 08:30 ET employment data (Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings) will be the key driver of dollar direction. Beyond that, watch for the 10:00 ET Prelim UoM Consumer Sentiment and Inflation Expectations. A strong payrolls print could see the DXY quickly retest 98.00, while a miss could accelerate the move towards 97.50. President Trump’s 12:00 ET speech is a wildcard, but unlikely to override the data impact. The pain trade for the dollar is a surprisingly hawkish Fed pivot on the back of a robust jobs report.

  • Euro Bids Higher as ECB Easing Path Slows – Friday, 8 May

    Where we are: EUR/USD is currently trading at 1.1777, up 0.45% on the day and testing the upper end of its intraday range of 1.1723-1.1778. The Fiber has caught a bid throughout the European morning, extending gains from the Asian session and challenging levels last seen in late April. This current level marks a significant breach of recent resistance, potentially paving the way for further upside.

    What’s driving it: The Euro is catching a bid as expectations for aggressive ECB easing have been tempered. While the ECB cut rates in April, retaining a mild easing bias, sticky services inflation near 3% and wage data will keep the doves on a short leash. Recent communications from ECB officials, including Lagarde’s comments on stablecoins and Schnabel’s discussion of central bank independence, signal a cautious approach to further easing. The Euro is being additionally supported by broader risk-on sentiment, reflected in the rally in US equity futures, and a weaker DXY trading at 97.77.

    • ECB Deposit Facility Rate at 2.50% after a 25bp cut on April 17th.
    • DE 2Y yields are down 2bp d/d to 2.578%, suggesting a slight easing of monetary policy expectations but not enough to trigger a sell-off.
    • CFTC data shows net non-commercial Euro positioning modestly long at +35,712 contracts, leaving scope for further upside on short covering.

    NY session focus: All eyes are on the 08:30 ET US jobs report (Average Hourly Earnings, Non-Farm Employment Change, and Unemployment Rate). A weaker-than-expected print could fuel further Dollar weakness and propel EUR/USD towards 1.1800, while a strong report could trigger a reversal. The 10:00 ET Prelim UoM Consumer Sentiment and Inflation Expectations will also be closely watched for further clues on the Fed’s policy path. Watch for the ECB President Lagarde speaking at 09:00 CET as well. The trade that’s working is long EUR/USD. The trade that’s at risk is short EUR/GBP given the broader risk-on mood. The pain trade is a strong US jobs report sending EUR/USD back below 1.1700, squeezing Euro longs.

  • Pound Firms as Gilts Rally Post-Election – Friday, 8 May

    Where we are: GBP/USD currently trades at 1.3621, up 0.52% on the day, trading near the top of its intraday range of 1.3547-1.3624. Cable has caught a solid bid during the European morning, extending gains from yesterday’s close above 1.3550. The pair is testing levels not seen in over two months as Sterling outperforms against the backdrop of easing political concerns and softer UK yields.

    What’s driving it: Sterling is finding support from a rally in UK gilts after local election results showed that Prime Minister Starmer’s Labour Party losses were less severe than feared. This has eased some political uncertainty that had been weighing on the currency. While the Bank of England held rates steady at 4.50% at the last meeting, the market is still pricing in some tightening by year end, giving the Pound a bid on any sign of political stability. The US 10-year yield falling to 4.357% is also applying downward pressure on the Dollar, supporting GBP/USD.

    • UK 2-year gilt yields are down 8bp on the day, signalling a softening in near-term rate expectations post-election results.
    • Net non-commercial GBP positioning remains crowded short at -60,639 contracts, representing the 15th percentile of the 52-week range, suggesting squeeze potential if the current bullish trend continues.
    • The Market Participants Group meeting minutes released this morning show the BoE is actively engaging with market participants on relevant themes, signaling their sensitivity to market sentiment.

    NY session focus: The key event for the session will be the US jobs data at 08:30 ET, where the market is expecting Non-Farm Payrolls of 65k and an Unemployment Rate of 4.3%. A weaker-than-expected print could send US yields lower and fuel further GBP/USD upside, potentially targeting 1.3650. A strong print, however, could see Cable retrace towards 1.3580. Later at 13:20 London, keep an ear on any remarks from BOE Gov Bailey, in case it introduces any Sterling volatility. The pain trade for GBP/USD is a sustained break above 1.3650, triggering a significant short squeeze.

  • Yen Bears Still in Charge Despite Intervention Threat – Friday, 8 May

    Where we are: USD/JPY is currently trading at 156.55, down 0.19% on the day, after a relatively contained overnight range of 156.53-156.99. The pair remains elevated, consolidating after recent spikes higher and still well above the 156 handle. This level is particularly important given the previous intervention zones flagged by the market.

    What’s driving it: The primary driver remains the persistent yield differential between the US and Japan. The BoJ’s slow normalisation bias, reinforced by wage data suggesting only one more hike this year, contrasts starkly with US yields. While verbal intervention from Japanese officials is increasing, the market’s focus is squarely on actual policy adjustments. The US 10-year yield at 4.357% versus the Japanese 10-year at 2.473%—a spread of +188bp—continues to favor dollar strength despite the recent DXY pullback to 97.77.

    • BoJ held rates at 0.50% in March, signalling a willingness to hike further if warranted, but the pace remains glacial.
    • Reuters reports Japan is betting on Washington and the BoJ for “extra punch” in the yen battle, suggesting coordinated action is not off the table.
    • CFTC data shows net non-commercial JPY positioning is heavily short at -102,059 contracts, in the 0th percentile, leaving it ripe for a squeeze if sentiment shifts.

    NY session focus: The focus today will be on the 08:30 ET US jobs report, particularly the Non-Farm Employment Change (forecast 65K) and Average Hourly Earnings (forecast 0.3%). A strong print will likely reinforce dollar strength and send USD/JPY higher, testing the resolve of Japanese authorities. Watch for a potential break above 157.00 which could accelerate the move. Conversely, a weak print could trigger a short squeeze, targeting 155.00 initially. Traders should also be mindful of the 10:00 ET Prelim UoM Consumer Sentiment release and any commentary from President Trump at 12:00 ET. The pain trade here is a coordinated intervention that finally breaks the back of the Yen shorts.

  • Canadian Dollar Facing Volatility into Employment Data – Friday, 8 May

    Where we are: USD/CAD is currently trading at 1.3686, up 0.18% on the day, testing the upper end of its intraday range of 1.3643-1.3693. The pair has edged higher through the Asian and European sessions, partially retracing the dip seen earlier in the week. The market is holding just below the prior swing high, with traders eyeing the 1.3700 handle as resistance.

    What’s driving it: The Bank of Canada’s easing bias is still weighing on the Loonie, despite recent positive GDP data. Macklem’s comments following the April meeting highlighted concerns around tariff uncertainty and a softer growth path, keeping the prospect of future rate cuts alive, particularly if domestic demand continues to weaken. The 10Y Canadian yield is down 4bp d/d to 3.459%, further reflecting the market’s view of a potentially dovish BoC. While higher oil prices could typically support the CAD, WTI crude is down over 2% today, trading near $95/bbl, offsetting some of that traditional tailwind. This provides limited support ahead of today’s critical employment data.

    • BoC Governor Macklem highlighted “tariff uncertainty and softer growth path” as primary drivers for a still-present easing bias.
    • Canadian 10Y yields are down 4bp today.
    • CFTC data shows net non-commercial CAD positioning at -38,476 contracts, implying some room for short covering, but not at an extreme.

    NY session focus: All eyes are on the 08:30 ET release of Canadian employment change and unemployment rate, alongside the US jobs report. Strong Canadian data could offer some support to the CAD, potentially pushing USD/CAD back towards the 1.3600 level, while weak data could exacerbate the current upward trend. US average hourly earnings and non-farm payrolls, also at 08:30 ET, will be crucial for broader USD direction and risk sentiment. Focus on whether the US-CA 10Y yield spread will widen or contract. The pain trade here is a significant downside surprise in US payrolls triggering a broad risk-on move that simultaneously lifts oil and pulls down USD.

  • Aussie Bids on Copper Strength; Eyes US Data – Friday, 8 May

    Snapshot: AUD/USD trades at 0.7243, up 0.52% on the session, driven by strength in copper prices. The RBA remains reluctant to commit to a cut path, with the Board cautious due to services inflation and a tight labour market. Focus shifts to the 08:30 ET US jobs report.

    • AUD/USD showing strength above 0.7200, a break above 0.7250 would embolden the bulls.
    • Watch for a knee-jerk reaction to the 08:30 ET US data; a weaker print could exacerbate short USD positions.

    Bias into NY: Bullish AUD/USD while copper sustains its current bid. Look for a push towards 0.7275 on continued risk-on sentiment, even if the US jobs data comes in mixed, given the already crowded long positioning.

  • USD/CHF Faces Downward Pressure – Friday, 8 May

    Snapshot: USD/CHF currently trades at 0.7773, down 0.41% on the session, driven by the SNB’s active easing stance and the possibility of further rate cuts. Schlegel’s recent comments regarding a potential return to negative rates if disinflation overshoots is weighing on the Franc. Later today, the 08:30 ET US jobs report will be pivotal.

    • Watch for a break below 0.7770, which could trigger further downside in USD/CHF.
    • A stronger-than-expected US jobs report could provide a temporary boost to the pair, but the SNB’s dovish stance should limit upside.

    Bias into NY: We anticipate continued downward pressure on USD/CHF, targeting 0.7750, as the market focuses on the SNB’s easing bias and the attractiveness of CHF as a safe haven given rising global uncertainty.

  • Kiwi Pressured by Easing Bias, Labour Market – Friday, 8 May

    Snapshot: NZD/USD trades at 0.5964, up 0.42% on the day, largely tracking broader risk appetite as domestic catalysts remain light. The RBNZ’s firmly entrenched easing bias, signalled after the 25bp cut on April 9th, continues to weigh on the currency. Focus shifts to the 08:30 ET US jobs report, particularly given the RBNZ’s employment concerns.

    • NZD positioning remains crowded short (17th percentile), raising the risk of a squeeze if the US data disappoints significantly.
    • Watch for comments from President Trump at 12:00 ET; any renewed trade rhetoric could weigh on risk sentiment and, consequently, the Kiwi.

    Bias into NY: Cautiously bullish, targeting a test of 0.5970 resistance. While the RBNZ’s dovish stance is a headwind, a weaker dollar following the US data could provide a temporary lift for the Kiwi.

  • NY Session Tactical Brief – Thursday, 7 May

    Regime: Mixed, with VIX holding steady at 17.38 and US yields slightly lower, suggesting a cautious risk-on sentiment tempered by geopolitical tensions.

    Today’s market themes:

    • Mideast Peace Potential: Easing oil supply concerns dominate, pressuring crude and boosting risk assets.
    • Dollar Weakness: DXY continues its descent, supporting EUR, GBP, AUD, and gold.
    • Earnings Rotation: Focus shifts to industrial and financial earnings in the US after tech-led rally.

    The setup: Markets are pricing in a higher probability of a Middle East peace deal, driving WTI down nearly 6% to $90.21. This is providing a tailwind for risk assets, especially equities. However, crowded positioning in USD and Aussie could trigger a squeeze on any hawkish surprises. Watch US Unemployment Claims at 08:30 ET.

    Watch list (native time per event):

    • 08:30 ET USD: Unemployment Claims (forecast 205K, prior 189K)
    • 10:00 ET USD: Factory Orders (prior 0.8%)
    • 14:00 BST GBP: BoE’s Breeden speaks on Inflation

    Bias by asset:

    • DXY:
      • Direction: Down
      • Domestic (US): Fed likely to remain cautious; watch claims data.
      • Cross: Risk-on sentiment weighing; EUR and GBP strength.
      • Levels: Resistance at 97.90, support at 97.65.
    • EUR/USD:
      • Direction: Up
      • Domestic (EU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY weakness, positive risk sentiment, US-DE 10Y widening.
      • Levels: Support at 1.1740, resistance at 1.1800.
    • GBP/USD (Cable):
      • Direction: Up
      • Domestic (UK): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY weakness, boosted by positive risk sentiment.
      • Levels: Support at 1.3590, resistance at 1.3650.
    • USD/JPY:
      • Direction: Neutral
      • Domestic (JP): No fresh domestic catalyst — sensitive to US response.
      • Cross: US 10Y stable, risk-on environment, intervention risk high.
      • Levels: Support at 156.00, resistance at 156.50.
    • USD/CAD (Loonie):
      • Direction: Down
      • Domestic (CA): No fresh domestic catalyst — sensitive to US response.
      • Cross: WTI weakness, DXY direction, US-CA 10Y spread.
      • Levels: Support at 1.3620, resistance at 1.3650.
    • AUD/USD (Aussie):
      • Direction: Up
      • Domestic (AU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY weakness, China growth optimism.
      • Levels: Support at 0.7230, resistance at 0.7270.
    • NZD/USD (Kiwi):
      • Direction: Up
      • Domestic (NZ): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY weakness, positive risk sentiment.
      • Levels: Support at 0.5950, resistance at 0.5990.
    • USD/CHF (Swissy):
      • Direction: Down
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY weakness, safe-haven outflows into risk-on.
      • Levels: Support at 0.7770, resistance at 0.7800.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP neutral, EUR/JPY up, GBP/JPY up
      • Domestic: Relative hawkishness of BoE priced in; BoJ dovish.
      • Cross: Risk-on favoring JPY crosses; DXY impact on EUR/GBP.
      • Levels: Monitor ranges, relative yield direction key.
    • XAU (Gold):
      • Direction: Up
      • Domestic (asset-specific): Rising as breakevens rise; CB demand supportive.
      • Cross: DXY weakness, safe haven demand diminishing.
      • Levels: Support at 4700, resistance at 4765.
    • XAG (Silver):
      • Direction: Up
      • Domestic (asset-specific): Industrial demand supportive.
      • Cross: DXY weakness, positive risk sentiment.
      • Levels: Support at 8000, resistance at 8250.
    • WTI / Brent:
      • Direction: Down
      • Domestic (asset-specific): Peace deal/higher supply.
      • Cross: DXY strength would add to move lower; risk aversion would add to move lower.
      • Levels: Support at 90.00, resistance at 96.00.
    • Copper:
      • Direction: Up
      • Domestic (asset-specific): China rebound expectations/LME-stock
      • Cross: Global growth proxy; Dollar strength a headwind
      • Levels: Support at 615, resistance at 625
    • SPX:
      • Direction: Up
      • Domestic (US): Earnings momentum; rates stabilize.
      • Cross: Positive global tone, VIX suppression.
      • Levels: Futures support at 7380, resistance at 7410, cash support 7300.
    • NDX:
      • Direction: Up
      • Domestic (US): Mega-cap tech earnings supportive/ AI narrative.
      • Cross: Lower rates sensitivity, high beta.
      • Levels: Resistance at 28800, support 28600.
    • US30 (Dow):
      • Direction: Up
      • Domestic (US): Rebound in industrial earnings; cyclical shift.
      • Cross: Responding positively to bond-yield relief.
      • Levels: Resistance near 50200, support at 49900.
    • UK100 (FTSE):
      • Direction: Up
      • Domestic (UK): No fresh domestic catalyst — sensitive to US response.
      • Cross: Global risk, benefiting from oil decline.
      • Levels: Support at 22800, resistance at 23000.
    • DAX:
      • Direction: Neutral
      • Domestic (DE): Bund yields stable; weak economic data.
      • Cross: Watching US tech strength; risk-on sentiment.
      • Levels: Support at 24850, resistance at 25000.
    • Nikkei:
      • Direction: Up
      • Domestic (JP): JPY weakness driving earnings.
      • Cross: Catching up with US tech performance; risk-on buying.
      • Levels: Support at 62000, resistance at 63000.
    • BTC:
      • Direction: Neutral
      • Domestic (asset-specific): ETF flow-dependent, funding elevated.
      • Cross: risk-regime, positive overall, high correlation to tech.
      • Levels: Support at 80500, resistance at 81700.

    Positioning watch: CFTC data shows crowded longs in AUD, Copper, and Bitcoin (>90th percentile) and crowded shorts in JPY, GBP, and Nasdaq (

    The pain trade: A hawkish surprise from the US Unemployment Claims, triggering a USD rally and sending risk assets lower, would hurt the most positions.

  • DXY Under Pressure as Geopolitical Risk Premiums Unwind – Thursday, 7 May

    Where we are: The DXY currently sits at 97.69, down 0.22% on the session, trading near the low end of its intraday range of 97.68-97.93. Yesterday’s close in New York was closer to 97.90, so we’re starting the NY day on the back foot. The dollar is catching a bid from a slightly weaker open in risk assets, attempting to find support around the 97.65 level.

    What’s driving it: The primary driver for the dollar’s weakness remains the easing of geopolitical tensions surrounding the Middle East, specifically the increased probability of a US-Iran agreement. This risk-on sentiment is weighing on safe-haven demand for the greenback. Even with this backdrop, the Fed remains in a patient hold, awaiting further evidence of disinflation in core services and labour-cost moderation before considering rate cuts. The market is pricing in increased chances of rate cuts, though, which is pressuring the dollar. The 10-year breakeven inflation rate declining 5bps yesterday hints at cooling inflation expectations.

    • The US 2-year yield is down 4bps today to 3.834%, reflecting expectations of near-term rate cuts.
    • 10Y real yields (TIPS) rising 1bp to 1.96% present a headwind for gold.
    • Speculator positioning is crowded long, with net non-commercial contracts at +4,508. At the 92nd percentile, the DXY is ripe for a squeeze on any further dovish surprises.

    NY session focus: All eyes will be on the 08:30 ET Unemployment Claims release, with the forecast at 205K versus the previous 189K. A higher-than-expected print could provide a temporary boost to the dollar. Key levels to watch are 97.50 on the downside and 98.00 on the upside. The short USD/JPY trade remains compelling, while long USD/CAD is vulnerable. The pain trade remains a re-escalation of Middle East tensions, reigniting the dollar’s safe-haven appeal.

  • Euro Surges on Weaker Dollar, ECB Policy in Focus – Thursday, 7 May

    Where we are: EUR/USD is currently trading at 1.1775, up 0.21% on the session, breaching the overnight high of 1.1778. The pair has been consolidating gains made earlier in European trading, with the overnight range contained between 1.1745 and the current level. This price action marks a continuation of the bullish momentum seen yesterday, and sits comfortably above the prior NY close.

    What’s driving it: The euro is catching a bid, primarily driven by a softer dollar, as US yields drift lower and risk sentiment remains positive. Domestically, the market continues to digest the ECB’s recent 25bp rate cut to 2.50% at their April 17th meeting, with a mild easing bias maintained. Dovish expectations are being fueled by softening wage trackers and services HICP near 3%, which are solidifying the doves’ base case for a follow-up cut. The German 2-year Schatz yield is down 3bp on the day at 2.519%, while the 10-year Bund is down 2bp to 2.959%, indicating a flattening bias in the German curve.

    • ECB’s de Guindos this morning highlighted the importance of deepening financial integration to support Europe’s prosperity.
    • Money markets are pricing in approximately 50bps of ECB rate cuts by year-end, with a 75% chance of the first move in June.
    • Speculative positioning remains modestly long EUR, with net non-commercial contracts at +35,712 (10th percentile), suggesting squeeze potential remains limited.

    NY session focus: The main event for the NY session will be the 08:30 ET release of US Unemployment Claims, with a forecast of 205K versus a previous 189K. A significant miss to the upside could further pressure the dollar and lift EUR/USD towards 1.1800, while a beat could see a retest of the 1.1745 level. The US 10-year yield currently trades at 4.316%, down nearly 3bp on the session, and further downside would likely fuel the EUR/USD rally. The pain trade would be a surprise hawkish signal out of Europe, or a strong US jobs number that puts the Fed back in focus.

  • Cable Breaks Higher, Targeting 1.3700 as DXY Weakens – Thursday, 7 May

    Where we are: GBP/USD is currently trading at 1.3626, up 0.25% on the day and testing the upper end of its intraday range (1.3590-1.3631). Sterling has gained ground during the European session, breaking above previous resistance levels. The move builds on yesterday’s gains and positions Cable to test 1.3650 resistance, before a run at the 1.3700 level.

    What’s driving it: Sterling’s rally is primarily driven by dollar weakness, amplified by the risk-on sentiment evident in equity markets. Domestically, the market is quiet ahead of tomorrow’s Bank of England meeting. The MPC’s cautious stance, reinforced by the 8-1 vote to hold rates steady at 4.50% at the last meeting, keeps the market on edge, particularly given sticky services CPI. The upcoming MPC meeting will be critical, even if no move is expected: any shift in rhetoric towards a more dovish outlook, especially given Dhingra’s dissent, would be quickly priced in.

    • UK 2Y yields have softened slightly, down 4bp to 4.320%, reflecting the market’s anticipation of a potential shift in the BoE’s policy stance.
    • Crowded short positioning in GBP, evidenced by the -60,639 net non-commercial contracts, raises the risk of a squeeze, particularly if tomorrow’s MPC minutes surprise to the hawkish side or the data flow improves.
    • The FTSE 100’s outperformance (+0.61%) relative to European peers suggests some domestic resilience, adding to the positive sentiment surrounding Sterling.

    NY session focus: The main event for the US session is the 08:30 ET Unemployment Claims release. A higher-than-forecast print (above 205K) could exacerbate existing dollar weakness, pushing Cable higher. Conversely, a print below 189K would likely see a retracement back towards 1.3600. Keep an eye on US 10Y yields – a continued decline below 4.30% would support the risk-on move and benefit GBP. The working trade is to play Cable long above 1.3600, targeting 1.3700. A break below 1.3590 negates the bullish view. The pain trade for Sterling is a surprise hawkish signal from the BoE coupled with a recovery in the dollar driven by strong US data.