Category: Currencies

  • DXY Tests 98.00 as Geopolitical Risk Boosts Greenback – Tuesday, 5 May

    Where we are: The DXY is currently trading at 98.26, up 0.26% on the day, having traded in a range of 97.83-98.42 so far. The index is testing resistance around the 98.00 level and has pushed higher against the prior NY close of 118.3926 (USD Broad Index). Bullish momentum is building.

    What’s driving it: Safe-haven demand is supporting the Dollar amidst escalating tensions in the Middle East. The market fears a potential derailment of the US-Iran ceasefire and is pricing in a potential Fed response of further tightening to contain any resultant inflationary pressures. Domestically, the Fed remains in a patient hold stance, dependent on further disinflation in core services and a cooling in labor costs. The latest dot plot suggested only two cuts in 2026, reinforcing the hawkish narrative.

    • The 10Y Breakeven Inflation rate rose 2.0bp to 2.5%, further fueling rate-hike expectations.
    • US forces repelled Iranian attacks in the Strait of Hormuz.
    • CFTC data shows net non-commercial Dollar longs at the 92nd percentile, signaling squeeze risk if sentiment shifts.

    NY session focus: All eyes are on the 10:00 ET releases of ISM Services PMI (forecast 53.7), JOLTS Job Openings (forecast 6.86M), and New Home Sales (forecast 652K). Traders will scrutinize these releases for clues on the health of the US economy and their potential impact on Fed policy. A beat on the ISM could see the DXY testing 98.50, while a miss could trigger a pullback towards 97.80. The trade that’s working is fading risk-on rallies. The trade at risk is shorting the Dollar at these levels, given geopolitical uncertainty. The pain trade is a dovish surprise from the data, triggering a sharp Dollar sell-off and a risk-on surge.

  • Euro on Shaky Ground Despite ECB’s Easing Bias – Tuesday, 5 May

    Where we are: EUR/USD currently trades at 1.1691, barely changed on the day (+0.01%), trapped within a tight intraday range of 1.1677-1.1698. This level is a whisker above yesterday’s NY close. The pair is struggling to gain traction, weighed down by a strengthening dollar.

    What’s driving it: The Euro’s outlook is clouded by the ECB’s mild easing bias, cemented by last month’s 25bp rate cut. While the prospect of further cuts remains data-dependent, with wage trackers and services HICP under scrutiny, the bar appears low given the 2.5% deposit facility rate. Dollar strength, fuelled by a jump in the DXY to 98.26, is exacerbating the Euro’s woes, alongside a widening US-DE 10Y yield spread of +134bp. The collapse of the Romanian government adds a layer of political uncertainty within the Eurozone, potentially jeopardizing access to EU funds.

    • ECB retained a mild easing bias at its last meeting on April 17th, keeping a meeting-by-meeting approach.
    • Romanian government collapse adds to EU political instability.
    • Speculator positioning shows a modestly long EUR bias (+35,712 contracts), albeit at the 10th percentile, suggesting little room for further upside without a catalyst.

    NY session focus: The US ISM Services PMI and JOLTS Job Openings data at 10:00 ET will be crucial in determining the near-term direction of EUR/USD. A strong ISM print could further fuel dollar strength, targeting a break below 1.1675, while weak data may offer a temporary reprieve. Keep an eye on ECB President Lagarde’s speech at 14:30 CET for any hints about the future policy path. The trade at risk is short EUR/USD given the crowded DXY long. The pain trade would be a sharp reversal in US yields, squeezing dollar longs and lifting the Euro.

  • Sterling on the Defensive Despite Hawkish BoE Expectations – Tuesday, 5 May

    Where we are: GBP/USD is currently trading at 1.3541, up a touch on the day, within a relatively tight intraday range of 1.3514-1.3551. Cable is struggling to make headway despite a slight uptick in UK gilt yields, and is holding just above the prior NY close.

    What’s driving it: UK long-term borrowing costs hitting their highest level since 1998 has investors concerned about the UK’s fiscal outlook, capping Sterling’s upside. The BoE’s cautious stance, evidenced by the recent 8-1 vote to hold rates steady at 4.50%, adds to the uncertainty. A continued rise in yields and political instability fears risk further eroding Chancellor Reeves’s fiscal headroom. DXY strength, driven by a flight to safety amid geopolitical tensions, is adding additional pressure on Cable despite a strong risk bid in broader markets.

    • UK 10Y gilt yields are up 5bp d/d to 5.090%, the highest since 1998, reflecting increased concerns about long-term borrowing costs.
    • The Bank of England’s last decision on March 20th saw Dhingra dissent for a cut, highlighting the dovish undercurrent within the MPC, despite sticky services CPI.
    • CFTC data shows crowded Sterling shorts, with net non-commercial positions at -60,639 contracts, near the 15th percentile, suggesting squeeze potential.

    NY session focus: The market will be closely watching the 10:00 ET release of US ISM Services PMI and JOLTS Job Openings for cues on the US economy’s trajectory, which will influence the DXY and, in turn, Cable. Key levels to watch on the upside are intraday highs around 1.3551, with support around 1.3514. The current trade that’s working is fading rallies in GBP/USD, while the trade at risk is shorting Cable into a potential risk-on move sparked by weaker-than-expected US data. A hawkish surprise from US data would accelerate selling pressure on Cable, while a soft print could trigger a short squeeze. The pain trade for Sterling is a dovish repricing of BoE expectations amid a global growth slowdown.

  • Yen Remains Vulnerable as USD/JPY Eyes 158.00 – Tuesday, 5 May

    Where we are: USD/JPY is currently trading at 157.80, up 0.41% on the day, having traded in a range of 157.10-157.84. The pair has steadily climbed through the Asia and European sessions, breaking above yesterday’s highs and approaching the 158.00 level. This level will be key to watch as it flirts with previous intervention levels.

    What’s driving it: The primary driver for USD/JPY remains the widening US-Japan yield differential. The Bank of Japan’s commitment to a slow normalization process, reinforced by Governor Ueda’s willingness to hike further if warranted, is not providing sufficient support for the Yen. The 2s10s JGB curve at +112bp reflects expectations that rate hikes are some way off. With US 10-year yields at 4.422%, the US-Japan 10-year spread stands at a wide +192bp, keeping upward pressure on USD/JPY. DXY strength is amplifying the move, currently up 0.27% at 98.26, as is a general risk-on mood, as evidenced by futures pointing to a higher open. Wage data from the spring shunto continues to support the case for one more hike this year but the market sees the BoJ’s actions as too little too late.

    • USD/JPY broke key resistance at 157.50, opening the door for a test of intervention levels above 158.00.
    • The US-Japan 10-year yield spread remains extremely wide, incentivizing carry trades that favor the USD.
    • Net non-commercial JPY positioning remains heavily short at -102,059 contracts (0th %ile), increasing the risk of a short squeeze if the BoJ surprises the market.

    NY session focus: All eyes on the 10:00 ET US data dump – ISM Services PMI, JOLTS Job Openings, and New Home Sales. Better-than-expected prints will likely propel USD/JPY higher, potentially testing 158.50 and triggering further intervention speculation. Watch US 10-year yields for direction; a move above 4.45% would likely exacerbate Yen weakness. The trade that’s working is selling JPY against USD and other crosses. The trade at risk is shorting USD/JPY if the BoJ unexpectedly intervenes or signals a more aggressive tightening path. The pain trade for USD/JPY is a coordinated global central bank effort to weaken the dollar.

  • Loonie pressured by Crude dip, BoC watched closely – Tuesday, 5 May

    Where we are: USD/CAD is trading at 1.3625, a marginal uptick of 0.01% on the day, holding near the upper end of its intraday range of 1.3604-1.3630. The pair is consolidating after a strong run that has seen it test levels not seen since early March, supported by broad dollar strength. With the European session winding down and US data imminent, USD/CAD is positioned for potential volatility.

    What’s driving it: The Bank of Canada’s slightly less dovish stance continues to underpin the Canadian Dollar. Governor Macklem’s recent comments citing tariff uncertainty and a softer growth path, while holding rates steady at 2.75%, also left the door open for potential hikes if energy prices sustain inflationary pressures. Weaker WTI crude prices, down nearly 2% at $103.31, are offsetting some of that support, adding a headwind as oil is typically a key CAD driver. Dollar strength, reflected in the DXY’s rise to 98.26, is further complicating the picture, driving USD/CAD higher despite the BoC’s hawkish lean.

    • Canada’s latest CPI print of 7%, a slight increase from the prior 6.9%, underscores the inflationary challenge facing the BoC.
    • The US-Canada 10-year yield spread sits at +81bp, favouring the dollar and creating a tailwind for USD/CAD.
    • CFTC data shows net non-commercial CAD positioning modestly short at -38,476 contracts, leaving room for a potential squeeze if the Loonie catches a bid.

    NY session focus: The 10:00 ET release of US ISM Services PMI, JOLTS Job Openings, and New Home Sales will be the primary focus for USD/CAD traders. Strong US data could fuel further dollar strength, pushing USD/CAD towards 1.3650 and potentially triggering a test of the March highs. Conversely, a soft print could see the pair retreat towards 1.3580, testing intraday support. The trade at risk is a short-CAD position predicated on continued oil strength; the working trade is to fade dips given the current macro dynamics. The pain trade for USD/CAD is a dovish repricing after the US data and a surprise recovery in oil prices, which would fuel a rapid CAD rally.

  • Aussie Grinds Higher, Awaiting RBA Fireworks – Tuesday, 5 May

    Snapshot: AUD/USD trades at 0.7175, up 0.10%, buoyed by copper strength and a slightly softer US 10-year yield. The market is squarely focused on the RBA rate decision and statement at 14:30 AEST, where a hold is widely expected.

    • Watch for any shift in tone around services inflation and the labour market in the RBA statement; a surprisingly hawkish slant would trigger a squeeze, given the crowded long positioning (96th percentile).
    • ISM Services PMI and JOLTS Job Openings at 10:00 ET will provide a cross-check on the US economic outlook, though domestic drivers will dominate AUD sentiment today.

    Bias into NY: Neutral-to-bullish, contingent on RBA rhetoric. A steady hand from Bullock, maintaining the current cautious stance, should see AUD/USD consolidate around the 0.7150-0.7200 range; a hawkish surprise could push it through 0.7200.

  • USD/CHF Remains Under Pressure as SNB Easing Looms – Tuesday, 5 May

    Snapshot: USD/CHF trades at 0.7838, down 0.02% on the day, as markets anticipate Swiss CPI data due at 08:30 CET. The SNB’s active easing posture, underscored by the recent 25bp rate cut and Governor Schlegel’s openness to negative rates, continues to weigh on the Swissy. Today’s CPI print represents a key catalyst.

    • Watch for a break below 0.7825, the intraday low, which could signal further downside.
    • Risk stems from the upcoming US ISM Services PMI at 10:00 ET, which could provide a counter-narrative if it significantly outperforms expectations.

    Bias into NY: Short USD/CHF. The SNB’s commitment to combating CHF strength and the prospect of further easing, coupled with relatively low Swiss yields, favour continued weakness; a breach of 0.7800 is in sight if CPI misses.

  • Kiwi Firms as Employment Data Looms – Tuesday, 5 May

    Snapshot: NZD/USD trades at 0.5882, up 0.14% on the session. The RBNZ’s firmly entrenched easing bias, reinforced by the recent 25bp cut and Orr’s signal for further easing, remains the dominant driver. All eyes are now on tonight’s 10:45 NZT Employment Change and Unemployment Rate prints.

    • Watch for a break above 0.5891 intraday high. A strong employment report could trigger a short squeeze given the crowded net-short positioning.
    • Geopolitical tensions in the Middle East and their impact on risk sentiment could cap any Kiwi upside, particularly with the DXY trading at 98.26.

    Bias into NY: A neutral-to-bullish bias prevails ahead of the employment data. A print significantly above the 0.3% forecast for Employment Change could see NZD/USD test 0.5900; weaker data would likely see a retracement towards the 0.5850 level.

  • NY Session Tactical Brief – Monday, 4 May

    Regime: Risk-off, with escalating Middle East tensions driving haven demand and weighing on equities; VIX at 16.89.

    Today’s market themes:

    • Geopolitical risk: Oil spike and risk-off sentiment due to heightened tensions in the Strait of Hormuz.
    • USD strength: Continued consolidation after recent gains, influenced by yield differentials and risk aversion.
    • ECB policy divergence: ECB hints at rate hikes clash with dovish undertones from BoJ and others.

    The setup: The spike in oil prices driven by Mideast tensions is fueling inflation fears and pressuring risk assets. Traders are pricing in a potential hawkish response from central banks, particularly the ECB, exacerbating the downside pressure on equities. Watch for further escalation in the Middle East, with a risk of a deeper equity sell-off if oil breaches $105 and 10Y yields rise further.

    Watch list (native time per event):

    • 15:30 ET CAD: BOC Gov Macklem Speaks

    Bias by asset:

    • DXY:
      • Direction: Neutral to bullish
      • Domestic (US): Fed on hold / Yield consolidation
      • Cross: Safe-haven flows / Global risk aversion
      • Levels: Support 118.50 / Resistance 119.00
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): ECB rate hike expectation / slow growth
      • Cross: DXY strength / Risk-off flows
      • Levels: 1.1650 / 1.1750
    • GBP/USD (Cable):
      • Direction: Neutral to bearish
      • Domestic (UK): BoE cautious / Data dependent
      • Cross: DXY strength / risk aversion
      • Levels: 1.3550 / 1.3650
    • USD/JPY:
      • Direction: Bullish, but with intervention risk
      • Domestic (JP): BoJ dovish / Yield curve control
      • Cross: US 10Y strength / Risk-off buying USD
      • Levels: 157.00 / 158.00
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC cautious / WTI boost limited
      • Cross: DXY strength / US growth advantage
      • Levels: 1.3650 / 1.3700
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): RBA dovish / Rate cut odds rise
      • Cross: DXY strength / China weakness / Risk-off
      • Levels: 0.7150 / 0.7250
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ dovish stance continues
      • Cross: DXY strength / Risk aversion
      • Levels: 0.5850 / 0.5950
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB easing / Yield disadvantage
      • Cross: Safe-haven unwind / DXY strength
      • Levels: 0.7800 / 0.7850
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): Neutral, Neutral, Bullish
      • Domestic: Relative CB stance + yields
      • Cross: DXY / Risk / cross-of-crosses dynamics
      • Levels: 0.8500-0.8600 / 170.00-171.00 / 192.00-193.00
    • XAU (Gold):
      • Direction: Bearish
      • Domestic (asset-specific): Rising real yields / Reduced haven demand
      • Cross: DXY strength / Risk-off waning
      • Levels: 4500 / 4550
    • XAG (Silver):
      • Direction: Bearish
      • Domestic (asset-specific): Industrial demand lackluster
      • Cross: DXY strength / Risk-off waning
      • Levels: Lower toward 47
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Hormuz disruption / OPEC restraint
      • Cross: DXY influence / Risk regime
      • Levels: 100 / 105
    • Copper:
      • Direction: Neutral
      • Domestic (asset-specific): China stimulus needs affirmation
      • Cross: Global growth proxy / DXY
      • Levels: $5.00 / $5.10
    • SPX:
      • Direction: Bearish
      • Domestic (US): Earnings worries / Fed on hold / Rising yields
      • Cross: VIX spike / Geopolitical tension
      • Levels: 5100 / 5150
    • NDX:
      • Direction: Bearish
      • Domestic (US): Real yields / Mega-cap scrutiny
      • Cross: Rate sensitivity / VIX
      • Levels: 18250 / 18400
    • US30 (Dow):
      • Direction: Bearish
      • Domestic (US): Cyclical concerns / Bond sell-off
      • Cross: Bond-yield impact
      • Levels: 38500 / 39000
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Sterling level / Gilt impact
      • Cross: Global risk / US tone
      • Levels: 10300 / 10400
    • DAX:
      • Direction: Bearish
      • Domestic (DE): Bund pressure / EU outlook dimmed
      • Cross: US tech spillover / DXY
      • Levels: 23800 / 24200
    • Nikkei:
      • Direction: Neutral
      • Domestic (JP): JPY rebound limiting gains
      • Cross: US tech / Risk regime
      • Levels: 59000 / 60000
    • BTC:
      • Direction: Neutral
      • Domestic (asset-specific): ETF flow stalling / Funding rate high
      • Cross: DXY impact / Risk regime
      • Levels: $79000 / $81000

    Positioning watch: Dollar, Aussie, Copper and Bitcoin are crowded longs and vulnerable to disappointment; Yen, Kiwi, and Nasdaq are crowded shorts and vulnerable to squeezes. Watch for correlated reversals if headlines shift.

    The pain trade: A de-escalation of Middle East tensions, combined with surprisingly dovish comments from Macklem at 15:30 ET, could trigger a rapid unwinding of oil longs and a short squeeze in risk assets, particularly Nasdaq.

  • Dollar Consolidates Gains as Fed Patience Remains Key – Monday, 4 May

    Where we are: The DXY is trading around 118.75, consolidating overnight gains, following a period of sideways movement. This is slightly above Friday’s close. Key levels to watch are 119.00 as resistance and 118.50 as immediate support. The market appears to be waiting for fresh catalysts before committing to a direction.

    What’s driving it: The dollar’s strength is primarily underpinned by the Federal Reserve’s patient stance. The FOMC reaffirmed its data-dependent approach at the last meeting in March, with the dot plot signalling only two potential rate cuts in 2026. Rising oil prices and escalating tensions in the Strait of Hormuz are also contributing to the Greenback’s appeal as a safe haven. Meanwhile, Barclays recently joined the camp expecting no Fed rate cuts this year, reinforcing the higher-for-longer narrative that favors the dollar.

    • US 10Y real yields continue to fall, now at 1.94%, providing a tailwind for gold and indirectly supporting the dollar through inflation fears.
    • Speculator positioning in the dollar remains crowded long, at the 92nd percentile, increasing the risk of a sharp squeeze if data disappoints.
    • The 2s10s spread is at 0.51%, indicating a mildly positive yield curve, reflecting cautious optimism about the US economic outlook.

    NY session focus: All eyes will be on incoming US economic data, especially leading into the May 7th Fed meeting. Today, traders will be eyeing any further developments regarding Middle East tensions, which could impact risk sentiment. The 08:30 ET data print will be critical for intraday direction. The trade that’s working right now is fading risk rallies in G10, buying USD dips. The trade at risk is shorting USD into sticky inflation. The pain trade for the dollar is a surprisingly dovish tilt from the Fed combined with a significant de-escalation in geopolitical tensions.

  • Euro Bids Higher as ECB Rate Cut Bets Solidify – Monday, 4 May

    Where we are: EUR/USD is currently trading around 1.1705, having broken above the overnight high of 1.1695. The pair held a tight range overnight, finding support near 1.1670. This level is just above the prior NY close of 1.1665, with the break above suggesting building bullish momentum heading into the New York open.

    What’s driving it: The Euro is catching a bid as market participants are increasingly pricing in a June rate cut by the ECB. ECB speakers are walking a fine line, but the recent 25bp cut at the April 17th meeting, combined with the mild easing bias, keeps the pressure on. While Kazimir is pushing back against this narrative, suggesting a June rate hike is “all but inevitable,” the market is clearly leaning the other way, especially given the Eurozone HICP at 2% and Core HICP at 2.3%. We believe the market is pricing in a higher probability of continued easing as the data trajectory leans dovish.

    • The ECB’s Survey of Professional Forecasters for Q2 2026 showing that Euro-Zone inflation is seen as temporary supports the doves’ argument for further easing.
    • Speculator positioning in EUR is modestly long at +35,712 contracts, but this is at the 10th percentile over the last 52 weeks, suggesting squeeze risk is relatively low.
    • The rise in oil prices (WTI Crude at $99.89) could add to inflationary pressure, potentially staying the ECB’s hand.

    NY session focus: The 08:30 ET data dump will be crucial; watch for reactions in the US 2Y (currently 3.88%) and 10Y (4.4%) yields. A soft print would likely accelerate the Euro bid, targeting the 1.1750 level. A strong print would test the resolve of the ECB easing narrative, potentially pushing EUR/USD back towards 1.1650. The trade that’s working right now is fading hawkish ECB rhetoric and buying dips. The trade at risk is shorting EUR/USD ahead of potential upside surprises. The pain trade for EUR/USD is a hawkish repricing by the ECB, fueled by a significant re-acceleration in services inflation.

  • Pound Vulnerable Below 1.36 as Data-Dependence Bites – Monday, 4 May

    Where we are: Cable is currently trading at 1.3585, having tested but failed to convincingly break above the 1.36 level overnight. The pair remains rangebound, oscillating between 1.3550 and 1.3620 since the European open, and is slightly below Friday’s New York close of 1.3610. We’re watching to see if early weakness persists, or if dip-buyers step in ahead of the US open.

    What’s driving it: Sterling’s resilience is being tested by the Bank of England’s cautious stance, which is increasingly at odds with hawkish market pricing. The MPC’s 8-1 hold in March, with Dhingra dissenting for a cut, highlights the internal debate. Recent UK data paints a mixed picture: while unemployment fell to 4.9% in January, sticky CPI, particularly services CPI near 5%, keeps the Bank on its toes. The market sees a roughly 50% chance of a Bank of England rate hike in June and expects two 25bp increases by September; this looks aggressive given the incoming data.

    • The Bank of England held rates steady at 4.50% at its last meeting with an 8-1 vote split, highlighting the committee’s data-dependent approach.
    • UK CPI remains elevated at 3.3% YoY in March, further complicating the BoE’s policy outlook.
    • CFTC data shows crowded short GBP positioning, with net non-commercial positions at -60,639 contracts, placing it in the 15th percentile. A hawkish surprise could trigger a violent squeeze.

    NY session focus: All eyes will be on US 08:30 ET data prints. A strong print will see those GBP shorts add to their positions; equally any further upside surprise in inflation will increase expectations of a BOE hike. Watch for reactions around 1.3550; a break there opens the door to 1.35. The trade that’s working is short GBP/USD on rallies to 1.3620. The trade at risk is a short squeeze fuelled by a dovish surprise on the US side. The pain trade is Cable punching through 1.37 and forcing shorts to cover into strength.

  • Yen Under Pressure; Intervention Risk High – Monday, 4 May

    Where we are: USD/JPY is trading around 157.25 early in the New York session, consolidating after a volatile overnight session that saw the pair briefly spike lower following suspected intervention. The pair remains well above Friday’s close near 156.00, but is struggling to build on the momentum after pushing against 158.00 in Asia. Key levels to watch include 155.50 as initial support and 158.00 as near-term resistance.

    What’s driving it: The underlying pressure on the Yen persists as the Bank of Japan maintains its slow normalisation bias, keeping the policy rate at 0.50%. While Ueda has flagged a willingness to hike further if the outlook tracks projections, the wide US-Japan rate differential continues to support the dollar. This is compounded by the market’s assessment of the BOJ’s relatively dovish stance compared to the Federal Reserve, who are showing no signs of easing. Although wage data supports the case for one more hike this year, Yen weakness past prior intervention zones materially raises MoF/BoJ communication risk, and this remains the biggest factor keeping USD/JPY gains in check.

    • The Bank of Japan held rates steady at its last meeting on March 19th, but signalled a willingness to hike further.
    • Speculative positioning remains crowded short JPY, with net non-commercial positions at -102,059 contracts, sitting at the 0th percentile on a 52-week lookback and raising squeeze risk.
    • 10Y Breakeven Inflation rose 2.0bp d/d to 2.48%, widening the gap with a more stable Nominal 10Y Treasury, indicative of sticky inflation and a higher-for-longer rate regime in the US.

    NY session focus: Traders will be closely watching for further signs of intervention from Japanese authorities, particularly if USD/JPY approaches or exceeds the 158.00 level. The Goldman Sachs estimate that Japan can conduct 30 more Yen interventions will remain in the front of minds. US data is light today, which means the session will likely be driven by risk sentiment and positioning flows. Key levels to watch are 156.50 and 158.00. The short JPY carry trade remains the favoured play but is increasingly at risk if the MoF steps in again. The pain trade would be a coordinated intervention effort pushing USD/JPY back below 150.

  • Canadian Dollar Bulls Need Macklem to Stay Hawkish – Monday, 4 May

    Where we are: USD/CAD currently trades around 1.3680, holding steady after a relatively quiet overnight session. The pair remains within striking distance of its recent lows, having tested the 1.36 level last week. The near-term bias still favours a grind lower, but the market needs a fresh catalyst to break the 1.36-1.37 range decisively.

    What’s driving it: The Bank of Canada’s cautious stance continues to weigh on the Canadian Dollar. Despite recent upside surprises in both CPI (7.0% YoY) and monthly GDP (2.6%), the BoC held rates steady at 2.75% at its last meeting, citing tariff uncertainty and a softer growth path. The central bank maintains an easing bias, with Governor Macklem’s tone later today crucial for near-term direction. WTI Crude trading near $100/bbl continues to offer the Loonie some underlying support, but the BoC’s dovish tilt is capping upside potential. A key consideration is that short CAD positioning is already elevated, sitting at the 79th percentile, raising the spectre of a short squeeze if Macklem sounds unexpectedly hawkish.

    • BoC last held rates at 2.75% on April 16, maintaining an easing bias.
    • Canada CPI printed 7.0% YoY in March, above the previous reading of 6.9%.
    • Net non-commercial CAD positioning is modestly short, at -38,476 contracts, but the w/w increase and percentile reading suggest the market is already leaning bearish.

    NY session focus: All eyes will be on BoC Governor Macklem’s speech at 15:30 ET. A hawkish tilt, emphasizing inflation risks or downplaying tariff concerns, could spark a significant CAD rally, targeting a break below 1.36 and potentially testing the 1.35 handle. Conversely, a reiteration of the BoC’s cautious approach would likely see USD/CAD drift higher, retesting the 1.37 level. Watch US Treasury yields for further cues; a continuation of the recent decline in US 2Y yields (currently at 3.88%) could amplify any CAD strength. The pain trade here is a hawkish Macklem triggering a violent short squeeze in CAD.

  • Aussie Under Pressure as RBA Rate Cut Bets Mount – Monday, 4 May

    Snapshot: AUD/USD trades heavy near 0.7200, pressured by growing expectations of an RBA rate cut as early as May or July. Bullock’s recent statement highlighting “uneven” progress on inflation continues to be digested. No key Australian data scheduled before the NY open.

    • Watch 0.7150; break opens a test of the April lows.
    • Geopolitical tensions around Saudi Arabia/Iran, as well as Ukraine/Russia, could weigh on risk and pressure the Aussie further.

    Bias into NY: Short AUD/USD, targeting a break of 0.7150, as the RBA’s reluctance to commit to a cut path leaves the Aussie vulnerable to dovish repricing; falling US real yields offer only limited support.