Category: Currencies

  • NY Session Tactical Brief – Monday, 27 April

    Today’s market themes:

    • Iran tensions easing: potential peace proposal buoying risk assets, weighing on oil.
    • BOJ hold: yen weakness continues post-policy announcement.
    • Crowded positioning: squeeze risk in USD, JPY, AUD, BTC, and Copper.

    The setup: The market is pricing in reduced geopolitical risk following reports of a potential peace proposal from Iran, triggering a risk-on move. Expect continued USD weakness and commodity pullback near-term. Watch for a breakout above 216.00 in GBP/JPY to confirm bullish momentum. US 10Y at 4.323%.

    Watch list (London time):

    • 13:30 [Medium] USD: CB Consumer Confidence (forecast 97.0, prior 98.7)
    • 15:00 [Low] US: Richmond Manufacturing Index (forecast -5, prior -11)
    • Any BOJ speaker comments regarding future policy adjustments.

    Bias by asset:

    • DXY: Down, risk-on sentiment and unwinding of crowded longs, target 97.80.
    • EUR: Up, weaker dollar and wider US-DE 10Y spread (+130bp), target 1.1800.
    • GBP: Up, risk-on and slightly narrower US-UK 10Y (-63bp), targeting 1.3600.
    • JPY: Down, BOJ inaction fuels yen weakness; US-JP 10Y at +185bp.
    • CAD: Up, weaker dollar, supported by WTI strength.
    • AUD: Up, driven by energy prices and weaker USD.
    • NZD: Up, benefiting from risk-on sentiment, supported by reports of easing tensions.
    • CHF: Down, weaker dollar as DXY falls and risk appetite returns.
    • EUR/GBP, EUR/JPY, GBP/JPY: Neutral, watching cross currents of risk and individual currency drivers.
    • XAU (Gold): Neutral, real yields stable but safe haven demand ebbing.
    • XAG (Silver): Neutral, trading lower with gold; keep an eye on the gold/silver ratio.
    • WTI / Brent: Mixed, Iran headlines offset bullish drivers; watch for $98 WTI break.
    • Copper: Down, concerns over China’s growth trajectory.
    • SPX: Up, supported by risk-on sentiment, targeting 7220.
    • NDX: Up, benefiting from lower rates and mega-cap momentum.
    • US30: Neutral, mixed picture; impacted by rising oil costs and potential peace.
    • UK100: Neutral, struggling due to strength in GBP and commodity sector drag.
    • DAX: Up, driven by easing tensions regarding Iran.
    • Nikkei: Up, technology sector strength and yen weakness persist.
    • BTC: Down, risk-off sentiment in crypto; crowded longs suggest downside risk.

    Positioning watch: CFTC data reveals crowded longs in USD, AUD, Copper, and Bitcoin, increasing squeeze risk on any negative news. JPY and NZD are crowded shorts, vulnerable to positive surprises.

    The pain trade: A surprise hawkish signal from a Fed speaker would crush risk assets, triggering a scramble to cover USD shorts and unwind equity longs.

  • Dollar Under Pressure as US-Iran Talks Eyed – Monday, 27 April

    Where we are: The DXY currently trades at 98.14, down 0.28 after an overnight range of 98.03-98.48. The Greenback is underperforming against most G10 currencies as risk sentiment improves slightly ahead of the New York open. This puts the index well below Friday’s close, continuing the downward trend.

    What’s driving it: The primary driver appears to be renewed optimism surrounding potential US-Iran talks, as highlighted by wire reports. This is weighing on the safe-haven demand for the Dollar. The US 10Y yield is currently at 4.323%, up slightly from its overnight low, but this isn’t providing sufficient support to offset the geopolitical developments. Speculator positioning remains crowded long in the USD, at the 94th percentile, increasing the risk of a squeeze if risk-on sentiment persists.

    • Reuters: “Dollar steady as traders eye US-Iran talks, central banks”
    • Falling US 10Y Real Yield (TIPS): 1.92% is a gold tailwind
    • CFTC data shows speculators are net long USD, at the 94th percentile (52-week), and down -187 contracts w/w.

    NY session focus: With no major US data releases scheduled before the New York open, the focus will remain on developments surrounding US-Iran negotiations. Any signs of progress could trigger a further decline in the Dollar. Watch for a break below the 98.00 level on the DXY; if it breaks this could trigger a sharper move lower given the crowded long positioning. The trade that’s working right now is short USD against risk-on currencies. The trade that’s at risk is long USD and safe-haven currencies. The pain trade for the Dollar is a swift resolution of US-Iran tensions.

  • Euro Attempts Recovery on DXY Weakness – Monday, 27 April

    Where we are: EUR/USD is currently trading at 1.1745, up 0.31% on the session, after printing a day range of 1.1705-1.1755. The pair has recouped some of last week’s losses, finding support near the 1.17 level. This bounce coincides with a broader weakening of the US Dollar, as the DXY trades down -0.29% to 98.14.

    What’s driving it: The primary driver is the broad USD weakness, reflected in the DXY decline. This appears linked to receding concerns about imminent aggressive Fed tightening, evidenced by the stability in US real yields. Simultaneously, the ECB’s survey pointing to a lack of second-round inflation effects has capped Euro upside, with the market factoring in a wait-and-see approach from the ECB on Thursday. The US-German 10-year yield spread sits at +130bp.

    • Reuters wire noting the ECB survey showed scant signs of second round inflation effects.
    • The FT reporting China warning the EU over the ‘Made in Europe’ law.
    • EUR net non-commercial positioning remains modestly long but at the 10th percentile, leaving room for further build.

    NY session focus: Expect volatility around the US data releases this morning, but the focus will quickly shift towards end-of-day flows. Watch for a break above 1.1755 to target 1.1800. Below, a retest of 1.1700 is likely. The EUR/USD trade continues to be dominated by swings in the DXY, making DXY levels critical indicators. The pain trade for EUR would be a resurgence in USD strength fueled by hawkish Fed commentary or geopolitical escalation.

  • Pound Breaks Higher on Dollar Weakness – Monday, 27 April

    Where we are: GBP/USD is currently trading at 1.3547, up 0.27% on the day, having printed a range of 1.3511 to 1.3576 so far. Cable is extending its gains from the Asia session, pushing through initial resistance at 1.3520. The move higher has been supported by broad dollar weakness as the DXY dips below 98.20. This morning’s move builds on the steadied performance near 1.35 after touching two-week lows.

    What’s driving it: The primary driver is a weaker dollar, with the DXY losing ground as US 10-year real rates remain anchored and the 10-year breakeven inflation rate holds steady at 2.42%. The US-UK 10-year yield spread remains deeply negative at -63bp, favouring GBP. There’s also lingering concern surrounding the impact of the Iran war, keeping the Bank of England on hold, reducing the risk of immediate dovish surprises. CFTC data shows a moderately short positioning in GBP, suggesting room for further upside.

    • Bloomberg headline: “Traders Buy Pound Protection on Policy, Election and War Risks” reflects the underlying uncertainty that could fuel a squeeze.
    • Reuters headline: “Bank of England to keep rates on hold while it gauges impact of Iran war” reduces hawkish pressure on the Pound.
    • The moderately short GBP positioning (-52,039 contracts) leaves room for a potential squeeze if the current risk-on sentiment persists, particularly if coupled with hawkish UK data later this week.

    NY session focus: The key level to watch is 1.3575, a break above which could trigger further short covering towards 1.3600. US data will be the main focus. The trade that’s working is buying GBP on dips against the EUR as the UK inflation outlook remains stronger. Risk-on is prevailing but traders should remain wary of geopolitical headlines, which could quickly reverse the current trend. The pain trade would be a hawkish surprise from the Fed, sparking a dollar resurgence and pushing Cable back below 1.3500.

  • Yen Bears Unbowed Despite Mild BOJ Disappointment – Monday, 27 April

    Where we are: USD/JPY currently trades at 159.22, down 0.35 from Friday’s close, after a volatile overnight session that saw a range of 159.10 to 159.60. The pair initially spiked higher following the BOJ decision before retracing to current levels. Despite the mild dip, we are still holding above the psychologically important 159.00 handle, indicating underlying buying pressure remains intact.

    What’s driving it: The BOJ’s decision to hold rates steady, coupled with a lack of any hawkish forward guidance in the Monetary Policy Statement and Outlook Report, is the primary driver behind the recent Yen weakness. While the FT previewed a potentially hawkish tone from the BOJ, the reality was far more dovish, perpetuating the carry trade dynamic. Rising US 10Y yields, now at 4.323%, widening the US-JP 10Y yield spread to +185bp, is further fueling the upside in USD/JPY.

    • Bloomberg wire headline “BOJ Seen Holding Rates in Messaging Risk for Ueda as Yen Teeters” underscores the market’s skepticism regarding the BOJ’s commitment to policy normalization.
    • US 10Y yield pushing to 4.323%, providing a constant bid for USD/JPY.
    • CFTC data reveals a heavily crowded short Yen position, with net non-commercial contracts at -94,460, sitting at the 0th percentile. This extreme positioning increases the risk of a sharp short squeeze on any positive Yen catalyst.

    NY session focus: With no major US data releases scheduled, the focus will remain on risk sentiment and any further comments from BOJ officials. Watch for potential intervention cues from Japanese authorities; Finance Minister Katayama has already stressed a readiness to take “decisive” action. A break above 159.60 would open the door to a test of 160.00. On the downside, initial support sits at 159.10, followed by 158.50. The current trade is long USD/JPY given the carry advantage and BOJ inaction. The risk trade is short JPY. The pain trade remains a significant BOJ policy shift that forces a massive short covering rally.

  • Loonie Breaks Lower as USD Momentum Resumes – Monday, 27 April

    Where we are: USD/CAD is currently trading at 1.3603, down 0.56% on the day. The pair broke lower in European morning trade after consolidating in a narrow range overnight, supported by the bottom end of the day’s range at 1.3598. This move erases Friday’s gains and puts USDCAD back near the week’s lows.

    What’s driving it: Dollar weakness is the primary driver, with the DXY shedding 0.29% to trade at 98.14. This is compounded by a modest bid in risk assets, as seen in futures markets. The US 10-year yield, while slightly higher at 4.323%, isn’t providing significant support to the greenback, and the US-Canada 10-year yield spread remains wide at +83bp, giving little incentive for CAD strength. Speculative positioning in CAD remains modestly short, although the recent increase in net shorts suggests a degree of capitulation, leaving some squeeze potential.

    • USD broad index down -0.24% as of last week Friday.
    • US 10Y real yield (TIPS) is falling, which is a tailwind for gold and a headwind for the USD.
    • Nikkei outperformance is broad-based, hitting its best levels in weeks.

    NY session focus: All eyes are on US data later this week, but today’s session will be driven by risk sentiment and dollar flows. Watch for any break of the 1.3598 level, which could open the door for a move towards 1.3550. On the upside, a sustained move above 1.3650 would negate the bearish momentum. The trade that’s working is short USDCAD on dips, targeting a move towards 1.3550. The trade at risk is being long USDCAD, especially if equity futures continue to grind higher. The pain trade for USDCAD is a sharp reversal in the DXY, pushing the pair back above 1.3700.

  • Aussie Bids on Energy Inflation and RBA Hawks – Monday, 27 April

    Snapshot: AUD/USD is trading at 0.7188, up 0.65% on the session, driven by surging energy prices and expectations of further RBA rate hikes. The US-AU 10Y yield spread sits at -65bp, widening slightly in favor of the Aussie as US yields remain relatively contained.

    • Watch for resistance around 0.7200, a break of which could trigger further upside.
    • The crowded long positioning presents a risk of a sharp correction if the upcoming Australian CPI data disappoints.

    Bias into NY: We favor further upside in AUD/USD, targeting 0.7220, supported by the hawkish RBA expectations and continued weakness in the DXY which trades near session lows at 98.14.

  • Swissy Weakens on DXY Dip; US Yields in Focus – Monday, 27 April

    Snapshot: USD/CHF trades at 0.7845, down 0.09% on the session, driven by a weaker DXY which sits at 98.14. Upward pressure on US 10Y yields, currently at 4.323%, is failing to offer sufficient support to the pair as the dollar broadly softens. Focus shifts to US data due this afternoon.

    • Watch for a break below 0.7834, the day’s low, which would open up further downside.
    • Risk lies in a potential hawkish surprise from US data at 13:30 London, which could trigger a rapid reversal.

    Bias into NY: Mildly bearish on USD/CHF while the DXY remains below 98.30, targeting a move towards 0.7820.

  • Kiwi Bounces on Middle East Optimism – Monday, 27 April

    Snapshot: NZD/USD is currently trading at 0.5916, up 0.82% on the session, driven by reports suggesting a potential easing of tensions in the Middle East. This optimism is overshadowing higher-than-forecast New Zealand inflation data from last week.

    • Watch resistance at 0.5922, today’s high.
    • Downside risk comes from the fragility of the Middle East situation; failure of peace talks would likely trigger a swift risk-off move.

    Bias into NY: The short-term setup favours further upside for NZD/USD, targeting 0.5950, as long as risk sentiment remains positive. The crowded short positioning also raises the risk of a squeeze.

  • NY Session Tactical Brief – Saturday, 25 April

    Today’s market themes:

    • Iran talks: Shifting expectations for US-Iran negotiations drives swings in oil and risk sentiment.
    • Dollar weakness: Broad USD selling pressure continues, impacting FX crosses and commodity prices.
    • Tech rebound: Nasdaq leading equities higher, fueled by a rotation back into growth and mega-cap stocks.

    The setup: Equities are bid into the NY open on hopes for Iran deal progress, weighing on crude and USD. Look for pullbacks in oil to be bought if Trump’s stance softens, and USD dip-buying at 98.15 DXY. US 10Y at 4.302% offers resistance.

    Watch list (London time):

    • 17:00 USD: President Trump Speaks (Medium)
    • No other scheduled events
    • No Central Bank Speakers

    Bias by asset:

    • DXY: Down – Iran talks pressure, target 98.00.
    • EUR: Up – Weak USD, US-DE 10Y spread +131bp supports.
    • GBP: Up – Sentiment improved, US-UK 10Y spread -61bp.
    • JPY: Down – Risk-on flows overshadow US-JP 10Y +187bp.
    • CAD: Up – Weaker USD and oil price sensitivity at 1.3650.
    • AUD: Up – Risk appetite lifts, eyeing 0.7200.
    • NZD: Up – Dollar weakness main driver, 0.5900 target.
    • CHF: Down – Risk-on offsets safe-haven demand; watch 0.7800.
    • EUR/GBP, EUR/JPY, GBP/JPY: Mixed – Play risk sentiment and individual drivers.
    • XAU (Gold): Up – Real yields falling, target 4775.
    • XAG (Silver): Up – Following Gold, watch Gold/Silver ratio.
    • WTI / Brent: Down – Iran talk hopes weighing, choppy around $94/$105.
    • Copper: Neutral – Modest China demand concerns; hold 600.
    • SPX: Up – Risk-on, 7250 potential on break of 7200.
    • NDX: Up – Rates ease, mega-caps lead, new highs possible.
    • US30: Neutral – Lagging tech, focus on economic data later in the week.
    • UK100: Down – Underperforming EU peers, still heavy tone.
    • DAX: Neutral – Holding steady, weak tech hampering.
    • Nikkei: Up – Catching up to US tech move, watch 60000.
    • BTC: Neutral – Consolidation near highs, risk-on/off correlation still relevant.

    Positioning watch: CFTC data shows crowded longs in USD, AUD, Copper, and Bitcoin, and crowded shorts in JPY and NZD — any hawkish comments from the Fed or negative trade news could trigger violent short squeezes in JPY/NZD.

    The pain trade: A complete breakdown of US-Iran talks and renewed Hormuz tensions would spike oil, send the dollar higher, and crush risk assets.

  • DXY Under Pressure as Rate Cut Bets Return – Saturday, 25 April

    Where we are: The DXY is currently trading at 98.36, down 0.31% on the session and near the low end of its intraday range of 98.32-98.75. This represents a notable shift from the previous New York close, and the dollar index has given up a good portion of its weekly gains. The move lower is being mirrored in the US Treasury market, where both the 2-year and 10-year yields are sharply lower, with the 2-year at 3.785% and the 10-year at 4.302%.

    What’s driving it: The primary driver appears to be a reassessment of the Fed’s rate path, fueled by reports of potential progress in US-Iran talks and an extension of the ceasefire in Lebanon. This is easing geopolitical concerns related to oil supply and inflationary pressures, leading traders to price in a higher probability of rate cuts later in the year. Also Warsh possibly stepping into the position as Fed chair. The crowded long positioning in the dollar, as evidenced by the 94th percentile net non-commercial positioning, amplifies the downside risk should these narratives gain further traction.

    • “Don’t count on rate cuts just yet: Warsh as Fed chair may not lead to big policy changes” – AP News.
    • US 2Y Yield: 3.785% (-0.059, -1.53%) intraday decline indicates a significant shift in near-term rate expectations.
    • Net non-commercial USD positioning at 94th percentile suggests a potential squeeze scenario if the bullish narrative falters.

    NY session focus: Traders will be closely monitoring risk sentiment. Further positive developments in the Middle East could exacerbate the dollar’s decline. Key levels to watch on the downside are the 98.00 and 97.50 marks on the DXY. Keep an eye on S&P 500 futures at 7194.75 and Nasdaq futures at 27435.00 as leading indicators. The trade that’s working is short USD vs. risk assets. The trade at risk is long USD based on geopolitical tensions. Trump’s speech at 17:00 London could introduce further volatility, particularly regarding ceasefire details. The pain trade here is a sudden reversal in risk sentiment, sending the crowded dollar longs scrambling to cover.

  • Euro Bounces as Dollar Weakens, Middle East Eases – Saturday, 25 April

    Where we are: EUR/USD is currently trading at 1.1719, up 0.28% on the session after a low of 1.1673. Overnight momentum pushed Fiber higher on a weaker dollar, testing intraday highs of 1.1721. The Euro is attempting to reclaim lost ground after trading at two-week lows earlier in the week, still holding below the prior NY close near 1.1750.

    What’s driving it: Dollar weakness is the primary driver, evidenced by the DXY falling to 98.36, down 0.31% as US yields compress. A partial unwind of geopolitical risk premia, tied to the US-Iran talks, is adding fuel to the fire. Speculator positioning in EUR is modestly long, at the 10th percentile, which means the squeeze potential on any sustained upside surprise is substantial.

    • Guardian Business: “California’s jet fuel supply drops to three-year low as Middle East turmoil squeezes global oil market,” suggesting a reversal of geopolitical tension releases upside pressure.
    • US 2Y yields are down 5.9bp to 3.785%, as the market prices in less hawkish Fed policy.
    • EUR net non-commercial positioning is only at the 10th percentile.

    NY session focus: Traders will be watching for follow-through on the dollar weakness, aiming for 1.1750 initially, then 1.1800 as the next key level. The US-German 10-year yield spread is currently at +131bp, with room to tighten in favor of the Euro, especially as European politicians like Macron posture toward greater continental military independence. Keep an eye on any headlines related to the US-Iran talks, as well as President Trump’s speech at 17:00 London time, which could introduce volatility. The pain trade here is a resurgence of geopolitical tensions driving a flight to safety and dollar strength, pushing EUR/USD back below 1.1700.

  • Pound Surges on US-Iran Optimism; Inflation Bites – Saturday, 25 April

    Where we are: GBP/USD is currently trading at 1.3533, up 0.49% on the session and testing the upper end of its daily range (1.3454-1.3534). Cable has shrugged off earlier weakness and is now above yesterday’s approximate NY close, driven by a weaker dollar and shifting rate expectations. The pair is bumping against resistance around the 1.3535 level, a break of which would open a test of the 1.3550 area.

    What’s driving it: The primary driver is cautious optimism surrounding potential US-Iran peace negotiations, as reported in the wire, leading to a broad risk-on sentiment and weaker USD. DXY is currently at 98.36, down 0.31% on the day. Additionally, rising UK inflation expectations are reinforcing bets on future Bank of England rate hikes. The US-UK 10Y yield spread is currently -61bp, which supports further upside for Cable if the move persists.

    • The UK businesses now expect CPI inflation to hit 4% in the year ahead, according to the Bank of England’s Decision Maker Panel, stoking BoE hike bets.
    • DXY is under pressure at 98.36, following through after the breach of 98.50 in early Europe.
    • Speculative positioning remains moderately short GBP, at -52,039 contracts, which leaves room for a squeeze if the bullish momentum continues.

    NY session focus: The main event risk for the NY session is President Trump speaking at 17:00 London time, and any remarks regarding Iran will likely cause volatility. We expect continued focus on yields, with the US 10Y currently at 4.302% and the 2Y at 3.785%. Watch for a sustained break above 1.3535, targeting 1.3580 initially, with stops below 1.3500. The working trade is long GBP/USD on dips. The crowded trade at risk is short GBP against the EUR, which is looking heavy. The pain trade is Cable pushing through 1.3600 and triggering a significant short squeeze.

  • Yen Weakness Persists Despite Intervention Threat – Saturday, 25 April

    Where we are: USD/JPY is currently trading at 159.42, down 0.24, but still within the day’s range of 159.31-159.84. The pair continues to show resilience against downside pressure, having breached the 159.00 level convincingly in Asia, despite renewed verbal intervention warnings from Japanese officials. Compared to the prior NY close, this represents some consolidation, but the underlying bid remains strong. Yesterday, the USDJPY briefly traded near 160.0, fueling concern of a BOJ reaction.

    What’s driving it: The primary driver remains the widening US-Japan 10-year yield spread, currently at +187bp. US yields, while slightly lower today (US 10Y at 4.302%, down 2.6bp), still provide significant incentive for USD strength, while the BOJ is widely expected to hold steady next week. Adding fuel to the fire, speculative positioning in the Yen remains heavily short, with net non-commercial positions at -94,460 contracts, near the 0th percentile of the 52-week range. This crowded short leaves the Yen extremely vulnerable to a squeeze on any hawkish BOJ surprise or coordinated intervention.

    • Finance Minister Katayama: “Officials retain a ‘free hand’ to intervene.”
    • US 10-Year Real Yield (TIPS) falling, providing a tailwind for Gold.
    • The Nikkei closed up 0.52% to 59716, demonstrating a strong domestic backdrop that isn’t translating into Yen strength.

    NY session focus: All eyes will be on Trump’s speech at 17:00 London. Any comments on trade or the dollar could significantly impact the pair. Watch for a potential retest of the 159.84 high. On the downside, a break below 159.30 could trigger a short-covering rally. The trade that’s working is fading Yen strength. The trade at risk is shorting USD/JPY at these levels without accounting for the ever-present threat of BOJ intervention. The pain trade is a coordinated intervention driving USD/JPY back towards 155.00.

  • USD/CAD Drifting Lower; Oil Still Needs to Confirm – Saturday, 25 April

    Where we are: USD/CAD currently trades at 1.3666, down 0.21% on the day, having ranged between 1.3663 and 1.3714. The pair is testing the lower end of its recent range after trading above 1.37 yesterday in New York. This move lower is a continuation of the trend seen over the past month, where the Canadian Dollar has strengthened over one percent.

    What’s driving it: The primary driver is the broad USD weakness, with the DXY down 0.31% to 98.36. The move in DXY is correlating to weakness in US yields, with the US 2Y down nearly 6bp to 3.785%. The US-CA 10Y spread remains elevated at +84bp, but this is not offering any support to USD/CAD amidst the broader USD softness. Positioning in CAD remains modestly short, but is not at an extreme that would suggest any immediate squeeze risk, despite the move.

    • US 2Y Yield: 3.785 (-0.059, -1.53%) suggests risk-on sentiment.
    • WTI Crude is up sharply to $91.06, but CAD is underperforming relative to crude, suggesting a potential catch-up trade if crude holds these levels.
    • Net non-commercial CAD positioning increased by nearly 20k contracts to -58,834, indicating that speculative shorts are being added into this move.

    NY session focus: The NY session will be focused on whether the risk-on bid continues, particularly in tech. Keep an eye on the S&P 500 futures which are up 0.72% to 7194.75. Crude oil price action will also be critical to confirm the CAD strength. We also have President Trump speaking at 17:00 London. Key levels to watch are 1.3650 on the downside and 1.3720 on the upside. The trade that’s working is short USD/CAD. The trade at risk is long USD/CAD, particularly if we see a further breakdown in yields and DXY. The pain trade would be a sharp reversal in risk sentiment sending yields and the dollar higher, which could quickly squeeze CAD shorts.