Category: EU

  • Euro Pressured by ECB Dovishness, Geopolitical Concerns – Friday, 22 May

    Where we are: EUR/USD is currently trading around 1.1605, testing the lower end of its recent range. Overnight, the pair remained largely contained between 1.1590 and 1.1620, failing to capitalize on the mild risk-on sentiment seen in Asia. This level is significantly below the prior NY close, highlighting the persistent selling pressure on the single currency.

    What’s driving it: The dovish undertones from the ECB continue to weigh on the Euro. Despite Eurozone HICP holding at 2%, and Core HICP at 2.3%, the ECB’s recent 25bp cut to the Deposit Facility Rate at its April 17th meeting, coupled with a maintained mild easing bias, signals further potential easing to come. Lane’s speech overnight has done little to counter this narrative. Concerns surrounding the impact of war on European stocks, as highlighted by Bloomberg, add to the bearish sentiment. The drop in US 2Y and 10Y yields is offering limited support, as the market anticipates potential divergence in monetary policy between the ECB and the Fed.

    • ECB’s mild easing bias retained despite headline inflation at target, suggesting a willingness to tolerate a slight overshoot to stimulate growth.
    • Net non-commercial Euro positioning remains modestly long at +40,200 contracts, near the 13th percentile, leaving room for further short-covering rallies if sentiment shifts.
    • Strategist warnings of a growing war impact on European stocks are amplified by FT’s alert that the EU is braced for a ‘dramatically’ worse economic outlook.

    NY session focus: All eyes are on the 10:00 ET release of Revised UoM Consumer Sentiment, although that is distinctly secondary to the overall risk picture and ECB narrative. A weaker print could offer some temporary relief to the Euro, but the overall trend remains down. Key levels to watch include the 1.1575 support zone, a break below which could trigger further downside towards 1.1500. Resistance lies at 1.1650. The short EUR/USD trade continues to work, given the ECB’s stance and broader geopolitical risks. The pain trade would be a significant de-escalation of geopolitical tensions coupled with hawkish signals from ECB officials shifting the policy outlook; that seems increasingly unlikely given current circumstances.

  • DAX Set for Weekly Gain Amid Cautious Optimism – Friday, 22 May

    Snapshot: The DAX is poised to close out the week with a 3.5% gain, currently trading around 24,800. The recent drop in Eurozone HICP to 2% is fueling hopes that the ECB may consider easing its monetary policy stance sooner than anticipated. Focus remains on geopolitical tensions and upcoming US data releases.

    • Watch for a break above 24,850 to confirm the bullish momentum.
    • Risk of profit-taking into the weekend and any escalation in US-Iran tensions could trigger a pullback.

    Bias into NY: We see a slightly bullish bias into the NY session, supported by the positive sentiment stemming from the cooling Eurozone inflation and hopes for de-escalation between the US and Iran. Continued tech strength could push the DAX towards 24,900 if risk sentiment holds.

  • Euro/Yen Primed for Further Upside – Friday, 22 May

    Snapshot: EUR/JPY is trading around 170.50, building on gains made earlier in the week. The pair is primarily driven by divergence in BoJ and ECB monetary policy stances, with the ECB recently cutting rates while the BoJ maintains a slow normalisation bias. Focus now shifts to incoming US data.

    • Watch for a break above 170.75 to confirm further upside momentum.
    • Risk of intervention rises sharply on a sustained break of 171.00.

    Bias into NY: Bullish, supported by the ECB’s mild easing bias contrasting with the BoJ’s slow normalisation, even as US yields show signs of stabilization, and with the household wage growth expectations data released from the BoJ this morning underscoring this divergence. Look for a test of 170.75 and potentially higher.

  • Euro/Sterling Remains Subdued as BoE Rate Cut Bets Recede – Friday, 22 May

    Snapshot: EUR/GBP is hovering near 0.8500, little changed on the session, as yesterday’s UK CPI data continues to support a hawkish repricing of BoE expectations. Today’s key event is the 07:00 London GBP Retail Sales print.

    • The UK CPI report showed a notable drop in headline and core inflation, yet services CPI remains stubbornly high, dampening hopes for an imminent BoE rate cut.
    • A negative surprise in this morning’s Retail Sales could weigh on Sterling, but any dovish reaction is likely to be limited given the prevailing focus on services inflation and wage pressures.

    Bias into NY: Mildly bearish EUR/GBP, targeting a retest of the 0.8480 level, driven by resilient UK services inflation and a cautiously hawkish BoE stance relative to the ECB’s mild easing bias.

  • NY Session Tactical Brief – Thursday, 21 May

    Regime: Risk-off, fueled by rising real yields and renewed Iran tensions, with VIX at 18.06 and DXY bid.

    Today’s market themes:

    • Oil shock revival: Geopolitical tensions around Iran exacerbate supply concerns, driving crude higher.
    • Rates repricing: Dimon’s hawkish comments reinforce the potential for higher-for-longer, lifting Treasury yields.
    • Mixed PMI signals: Eurozone and UK PMIs offer a mixed bag, with services sector weakness raising growth concerns.

    The setup: Renewed geopolitical risks are stoking inflation fears and pushing real yields higher, putting pressure on risk assets. Look for opportunities to fade rallies in equities, especially tech. Watch the 10Y real yield at 2.18% as a key level. Initial weakness in Dow futures around 39,850 offers a possible short entry.

    Watch list (native time per event):

    • 11:30 AEST AUD: Employment Change (forecast 16.7K, prior 17.9K)
    • 09:15 CET EUR: French Flash Manufacturing PMI (forecast 52.1, prior 52.8)
    • 09:30 London GBP: Flash Services PMI (forecast 51.7, prior 52.0)

    Bias by asset:

    • DXY:
      • Direction: Bullish
      • Domestic (US): Fed policy uncertainty, strong US yields
      • Cross: Risk-off sentiment, safe-haven demand
      • Levels: Resistance 119.50, support 119.00
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): Weak Eurozone PMIs, ECB dovishness
      • Cross: Strong DXY, widening US-DE 10Y spread, risk-off flows
      • Levels: Resistance 1.1620, support 1.1580
    • GBP/USD (Cable):
      • Direction: Bearish
      • Domestic (UK): Mixed UK PMIs, uncertainty around BoE path
      • Cross: Strong DXY, US-UK 10Y spread, risk aversion
      • Levels: Resistance 1.2660, support 1.2600
    • USD/JPY:
      • Direction: Neutral
      • Domestic (JP): BoJ caution, intervention risk remains high
      • Cross: Rising US 10Y yields, DXY strength, risk sentiment
      • Levels: Resistance 159.50, support 159.00
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC cautious tone, WTI volatility
      • Cross: Strong DXY, US-CA 10Y spread
      • Levels: Resistance 1.3820, support 1.3750
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): Mixed labour data, RBA tightening path uncertain
      • Cross: Strong DXY, US-AU 10Y spread, China growth concerns
      • Levels: Resistance 0.6680, support 0.6620
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ easing bias
      • Cross: Strong DXY, US-NZ 10Y spread, risk-off sentiment
      • Levels: Resistance 0.5900, support 0.5850
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB dovishness, Swiss yields lagging
      • Cross: Strong DXY, safe-haven demand
      • Levels: Resistance 0.7900, support 0.7850
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Neutral; EUR/JPY: Bearish; GBP/JPY: Bearish
      • Domestic: Relative ECB/BoE/BoJ stance, relative yields
      • Cross: DXY, risk regime, cross-of-crosses dynamics
      • Levels: Monitor key supports/resistances on charts
    • XAU (Gold):
      • Direction: Bearish
      • Domestic (asset-specific): Rising real yields, CB demand waning
      • Cross: Strong DXY, risk aversion not fully supportive
      • Levels: Resistance $4,510, support $4,480
    • XAG (Silver):
      • Direction: Bearish
      • Domestic (asset-specific): Slower industrial demand growth
      • Cross: Strong DXY, risk-off sentiment
      • Levels: Follow Gold
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Iran tensions / potential supply disruption
      • Cross: DXY offsetting factor, risk-off a moderate headwind
      • Levels: WTI Resistance $102, Support $98
    • Copper:
      • Direction: Bearish
      • Domestic (asset-specific): China growth concerns, LME inventories stable
      • Cross: Strong DXY, global growth proxy
      • Levels: Follow market trend, trade in accordance with real yields.
    • SPX:
      • Direction: Bearish
      • Domestic (US): Rising yields, earnings headwinds
      • Cross: Elevated VIX, global risk-off
      • Levels: Futures resistance 5300, cash support 5250
    • NDX:
      • Direction: Bearish
      • Domestic (US): Real yield sensitivity, mixed earnings
      • Cross: Rates sensitivity, elevated VIX
      • Levels: Follow SPX general resistance and support level
    • US30 (Dow):
      • Direction: Bearish
      • Domestic (US): Cyclical headwinds, rising yields
      • Cross: Bond-yield reaction
      • Levels: Follow SPX general resistance and support level
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Sterling strength, mixed PMI data, commodity exposure
      • Cross: Global risk, US tone
      • Levels: Resistance 10,400, support 10,350
    • DAX:
      • Direction: Bearish
      • Domestic (DE): Weak German PMIs, Bund yield increase
      • Cross: US tech, DXY, risk-off
      • Levels: Resistance is high, monitor yield trend
    • Nikkei:
      • Direction: Neutral
      • Domestic (JP): Cautious BOJ commentary, JGB yield focus
      • Cross: US tech reaction, global risk
      • Levels: Follow global risk sentiment
    • BTC:
      • Direction: Neutral
      • Domestic (asset-specific): ETF flows slowing, funding rates stable
      • Cross: DXY strength, risk-off, Nasdaq correlation
      • Levels: Resistance $68,000, support $67,500

    Positioning watch: AUD, Copper, and US Dollar are crowded longs (>80th percentile), creating squeeze risk on any positive surprises or a shift in sentiment. Nasdaq 100 and Japanese Yen are crowded shorts (<20th percentile), risking a sharp rally on positive catalysts.

    The pain trade: A dovish pivot from a Fed speaker today would trigger a violent short squeeze in Nasdaq and Yen, simultaneously undermining the DXY.

  • Euro Under Pressure as PMI Data Disappoints – Thursday, 21 May

    Where we are: EUR/USD is currently trading around 1.1600, near its weakest level since early April. The pair traded in a tight overnight range, failing to hold onto earlier gains after disappointing Eurozone PMI data. It is currently below yesterday’s New York close, suggesting continued selling pressure.

    What’s driving it: The primary driver is the weaker-than-expected Eurozone PMI data, raising concerns about the pace of economic recovery and potentially influencing the ECB’s policy path. French and German Flash PMI figures all came in below forecasts this morning. While the ECB cut rates by 25bp in April to 2.50%, keeping a mild easing bias, a sustained economic slowdown could embolden doves to push for further easing. A slightly negative 2s10s spread suggests concerns over future growth, amplified by EU cutting growth forecasts to 0.9% this year.

    • The French Flash Services PMI printed at 46.6 vs 46.5 expected.
    • The Eurozone economy unexpectedly contracted in May at the fastest pace since late 2023.
    • Speculator positioning in the Euro is modestly long at +40,200 contracts, offering limited fuel for a major squeeze.

    NY session focus: The focus shifts to the US data releases this morning, with the 08:30 ET Philly Fed Manufacturing Index and Unemployment Claims providing further cues on the relative strength of the US economy. Then later we get Flash Manufacturing PMI (Forecast: 53.8 | Previous: 54.0) and Flash Services PMI at 09:45 ET. A strong print in the US could push EUR/USD lower towards the 1.1550 level, while weaker data could offer a temporary reprieve. The key trade is fading rallies above 1.1620. The risk trade is an upside surprise in the US PMIs, triggering a sharp dollar rally and a test of the April lows in EUR/USD. The pain trade would be an unexpected hawkish signal from the ECB, catching the market leaning the wrong way.

  • DAX 40 Faces Headwinds Amid PMI Disappointments – Thursday, 21 May

    Snapshot: The DAX is under pressure after disappointing flash PMI data from both France and Germany this morning, particularly the services sectors. German Manufacturing PMI printed at 51.0, a slight miss of expectations. Adding to the pressure, BofA sees increasing crash risk for European equities.

    • Watch for any further downside revisions to Eurozone growth forecasts impacting the German index.
    • The US session will likely react to US data and sentiment.

    Bias into NY: The DAX is likely to remain under pressure, potentially testing lower supports, if US yields continue their upward trend amplified by risk-off sentiment following the weak PMI numbers. A break below 24,500 could open further downside.

  • Euro/Yen Vulnerable to PMI Misses – Thursday, 21 May

    Snapshot: EUR/JPY currently trades near 170.50, relatively unchanged on the session. The pair is sensitive to incoming eurozone PMI data, given the ECB’s data-dependent stance and recent rate cut. A miss could trigger a further repricing of ECB easing expectations.

    • Support near 169.80; a break would signal further downside.
    • Watch for any BOJ communication regarding yen weakness, especially if EUR/JPY breaches prior intervention levels.

    Bias into NY: Cautiously bearish on EUR/JPY. Any further weakening in the eurozone PMIs before the 08:30 ET US data print, specifically the German services number, could put pressure on the pair. A dovish ECB repricing would amplify the move.

  • Euro/Sterling Remains Heavy on BoE Hold Expectations – Thursday, 21 May

    Snapshot: EUR/GBP trades near 0.8520, little changed after mixed Eurozone PMI releases. The key driver remains the divergence in central bank expectations, with the Bank of England seen as less likely to cut rates in the near term than the ECB. All eyes on BoE Governor Bailey’s speech at 16:00 London.

    • Watch 0.8500 as a key support level; break could accelerate downside.
    • Risk: A hawkish surprise from Bailey could trigger a sharp Sterling rally.

    Bias into NY: Short EUR/GBP, targeting 0.8480. The relative hawkishness of the Bank of England continues to weigh on the cross, and firmer US yields are adding to the downside pressure.

  • NY Session Tactical Brief – Wednesday, 20 May

    Regime: Mixed — the VIX at 17.82 suggests a moderately risk-on environment, but rising US 10Y real yields near 2.13% offset the positive sentiment.

    Today’s market themes:

    • FOMC Minutes: focus on the Fed’s inflation outlook and rate-cut timeline.
    • Iran tensions: geopolitical risks weigh on oil and broader sentiment.
    • Nvidia earnings: potential market catalyst, could affirm rally or spur correction.

    The setup: All eyes on the FOMC Minutes at 2 PM ET. The market is pricing in minimal rate cuts this year. Hawkish surprises in the minutes could strengthen the dollar and pressure risk assets. A dovish surprise could weaken the dollar and boost stocks and bonds. Watch the 2Y yield for reaction.

    Watch list (native time per event):

    • 07:00 London [High] GBP: CPI y/y (forecast 3.0%, prior 3.3%)
    • 11:30 AEST [High] AUD: Employment Change (forecast 16.7K, prior 17.9K)
    • 14:00 ET [High] USD: FOMC Meeting Minutes

    Bias by asset:

    • DXY:
      • Direction: Neutral.
      • Domestic (US): FOMC minutes could provide hawkish catalysts.
      • Cross: Risk sentiment shifts amid Nvidia earnings anticipation.
      • Levels: Support at 119.00; resistance at 119.50.
    • EUR/USD:
      • Direction: Bearish.
      • Domestic (EU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength and rising US yields pressure the pair.
      • Levels: Resistance at 1.0830; support at 1.0780.
    • GBP/USD (Cable):
      • Direction: Neutral.
      • Domestic (UK): CPI miss fueled gilt buying – focus on MPC hearings.
      • Cross: DXY strength and risk appetite weigh on cable.
      • Levels: Resistance at 1.2700; support at 1.2650.
    • USD/JPY:
      • Direction: Bullish.
      • Domestic (JP): BoJ dovish stance and weak wage data.
      • Cross: US 10Y yield strength and DXY provide tailwinds.
      • Levels: Support at 158.50; resistance at 160.00.
    • USD/CAD (Loonie):
      • Direction: Bullish.
      • Domestic (CA): BoC cautious outlook and weak CPI.
      • Cross: DXY strength and weaker oil prices pressure CAD.
      • Levels: Support at 1.3750; resistance at 1.3800.
    • AUD/USD (Aussie):
      • Direction: Bearish.
      • Domestic (AU): RBA cautious stance on inflation. Employment data in focus.
      • Cross: DXY strength and China growth concerns weigh.
      • Levels: Resistance at 0.6700; support at 0.6630.
    • NZD/USD (Kiwi):
      • Direction: Bearish.
      • Domestic (NZ): RBNZ dovish stance after recent meetings.
      • Cross: DXY strength and risk-off sentiment impact the Kiwi.
      • Levels: Resistance at 0.5860; support at 0.5800.
    • USD/CHF (Swissy):
      • Direction: Bullish.
      • Domestic (CH): SNB easing bias supports USD/CHF upside.
      • Cross: DXY strength and risk-off flows support pair.
      • Levels: Support at 0.7850; resistance at 0.7950.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP Bearish, EUR/JPY Bullish, GBP/JPY Bullish.
      • Domestic: Relative CB policy (BoE more hawkish than ECB; BoJ more dovish).
      • Cross: DXY strength weighing on EUR/GBP; risk-on supporting JPY crosses.
      • Levels: EUR/GBP: 0.8480/0.8530; EUR/JPY: 170.00/171.00; GBP/JPY: 193.50/194.50.
    • XAU (Gold):
      • Direction: Bearish.
      • Domestic (asset-specific): Rising real yields increase the opportunity cost.
      • Cross: DXY strength weighs on Gold.
      • Levels: Resistance at $4,480/oz; support at $4,450/oz.
    • XAG (Silver):
      • Direction: Bearish.
      • Domestic (asset-specific): Weaker industrial demand prospects.
      • Cross: DXY strength and risk-off environment are headwinds.
      • Levels: Resistance at $32.00/oz; support at $31.50/oz.
    • WTI / Brent:
      • Direction: Neutral.
      • Domestic (asset-specific): Iran talks and Ukraine refinery attack priced in.
      • Cross: DXY strength and mixed risk sentiment.
      • Levels: WTI: $100/$103; Brent: $108/$111.
    • Copper:
      • Direction: Neutral.
      • Domestic (asset-specific): Wait for new China catalyst to lift LME stocks.
      • Cross: DXY and global growth prospects.
      • Levels: Resistance at $5.15; support at $5.00.
    • SPX:
      • Direction: Neutral.
      • Domestic (US): Earnings season nearing end; Fed policy key.
      • Cross: VIX stable, global sentiment depends on Nvidia.
      • Levels: Futures 5300/5340; cash support 5280/5320.
    • NDX:
      • Direction: Neutral.
      • Domestic (US): Nvidia earnings key; real yield reaction impacts valuation.
      • Cross: Rates sensitivity and VIX.
      • Levels: 19250/19450.
    • US30 (Dow):
      • Direction: Neutral.
      • Domestic (US): Awaiting for more industrials to show positive earnings.
      • Cross: Bond-yield reaction to FOMC minutes.
      • Levels: 39700/39900.
    • UK100 (FTSE):
      • Direction: Neutral.
      • Domestic (UK): Sterling swings impacting export-heavy index.
      • Cross: Global risk and US tone.
      • Levels: 10200/10300.
    • DAX:
      • Direction: Neutral.
      • Domestic (DE): No fresh domestic catalyst — sensitive to US response.
      • Cross: US tech and DXY.
      • Levels: 24300/24500.
    • Nikkei:
      • Direction: Neutral.
      • Domestic (JP): JPY weakness continues, JGB yields drive sentiment.
      • Cross: US tech and risk regime.
      • Levels: 59500/60000.
    • BTC:
      • Direction: Neutral.
      • Domestic (asset-specific): ETF flows holding steady, no major funding stress.
      • Cross: DXY and risk sentiment influencing Bitcoin’s price action.
      • Levels: 65000/68000.

    Positioning watch: Crowded longs in AUD and Copper (98th percentile) and crowded shorts in Nasdaq (0th percentile) and JPY (8th percentile) suggest squeeze risks if data improves or Fed turns dovish. Dollar long also extended (85th %ile) exposes downside on risk-on turn.

    The pain trade: A dovish surprise in the FOMC minutes would trigger a short squeeze in Nasdaq, fuel a rally in beaten-down gold, and weaken the dollar, hurting those positioned for higher rates.

  • Euro Faces Headwinds as ECB Easing Bias Remains – Wednesday, 20 May

    Where we are: EUR/USD is trading near 1.0805, holding steady after a choppy overnight session. The pair remains below its prior NY close, consolidating within a narrow range. Key levels to watch are 1.0780 as support and 1.0830 as resistance. Overall the Euro has seen little movement since the close of EU markets.

    What’s driving it: The dominant driver for the Euro remains the ECB’s mild easing bias. The central bank’s latest decision to cut rates by 25bp to 2.50% at the April meeting and retain its meeting-by-meeting language signals further easing may be on the horizon. This contrasts with a rising 10Y real yield in the US. Despite recent HICP prints remaining near the ECB’s 2% target, the services HICP near 3% keeps the doves in check, while a re-acceleration or energy spike could stay their hand.

    • The ECB’s April rate cut to 2.50% and forward guidance suggests more cuts are possible.
    • Eurozone HICP at 2% and Core HICP at 2.3% provide some support but remain above the ECB’s target.
    • Speculative positioning in the Euro is modestly long at +40,200 contracts, leaving some room for further upside but not signalling a major squeeze risk.

    NY session focus: All eyes will be on the release of the FOMC Meeting Minutes at 14:00 ET. A hawkish tilt in the minutes could trigger a dollar rally, pushing EUR/USD lower towards 1.0750. Conversely, a dovish tone could see the pair test 1.0850. The trade that’s working is shorting EUR/USD on rallies, given the ECB’s easing bias and rising US real yields. The risk is that a risk-on move fuelled by positive US data undermines the USD bid. The pain trade is a sustained break above 1.0850, squeezing Euro shorts.

  • DAX Faces Headwinds as Frankfurt Office Deal Collapses – Wednesday, 20 May

    Snapshot: The DAX is struggling near 24,400 following the collapse of Europe’s largest office deal since 2022, weighing on sentiment. Focus turns to Commerzbank’s annual general meeting and its potential takeover by UniCredit. No major German macro releases are due before the US open.

    • Watch for further downside if the DAX breaks below 24,300 support.
    • Risk: Elevated US real yields could further dampen risk appetite in the NY session.

    Bias into NY: Slightly bearish as the failed Frankfurt property deal and rising US real yields at 2.13% exert pressure. Expect the DAX to test lower, potentially towards 24,200, barring a major positive catalyst from US data.

  • Euro/Yen Pressure Builds as BoJ Rate Hike Nears – Wednesday, 20 May

    Snapshot: EUR/JPY is trading around 170.60, largely unchanged, as traders digest the prospect of further BoJ normalisation. The market’s focus is squarely on any signals reinforcing the case for another rate hike following the spring wage data. Risk sentiment is stable, with VIX at 17.82, providing little directional impetus.

    • Watch 171.00; breach opens way to 171.50 resistance on short covering.
    • Rising US real yields and firming dollar introduce downside risk if BoJ conviction weakens.

    Bias into NY: Mildly bullish, driven by lingering expectations of further BoJ hikes, although dollar strength presents a headwind; look for a test of 171.00. A dovish surprise from the ECB’s June meeting could quickly reverse this setup.

  • Euro/Sterling Pressured by UK Inflation Data – Wednesday, 20 May

    Snapshot: EUR/GBP is trading around 0.8510, down roughly 30 pips after hotter-than-expected UK CPI data this morning. The data has tempered expectations of a near-term Bank of England rate cut, contrasting with the ECB’s recent easing. Focus shifts to the Monetary Policy Report Hearings at 14:15 London.

    • Watch for a break below 0.8500, which could open the door to further downside.
    • Risk of a short squeeze if the Monetary Policy Report Hearings lean dovish, given stretched short GBP positioning.

    Bias into NY: Bearish on EUR/GBP as the UK inflation print supports a hawkish repricing of the Bank of England path; a continued rise in US 10-year real yields may also amplify downside pressure on the cross.

  • NY Session Tactical Brief – Tuesday, 19 May

    Regime: Mixed — VIX at 18.43 signals ongoing unease, but rising US yields underpin USD strength, offsetting risk aversion.

    Today’s market themes:

    • USD dominance: Rising US yields and safe-haven demand continue to buoy the Dollar across the board.
    • Inflation watch: Canadian CPI data offers key test for BoC rate-cut expectations.
    • Positioning unwind: Crowded longs in AUD and Copper face disappointment risk from China slowdown fears.

    The setup: The market is pricing in a hawkish Fed, driving the USD higher, with USD/JPY approaching multi-decade highs near 159.15. The trade is to fade crowded shorts in Nasdaq and Yen while selling AUD on weak data. The risk is a surprise dovish signal from the Fed, triggering a rapid unwinding of USD longs.

    Watch list (native time per event):

    • 11:30 AEST AUD: Monetary Policy Meeting Minutes
    • 08:30 ET CAD: CPI m/m (forecast 0.7%, prior 0.9%)
    • 10:00 ET USD: Pending Home Sales m/m (forecast 1.0%, prior 1.5%)

    Bias by asset:

    • DXY:
      • Direction: Higher
      • Domestic (US): US yields climbing; hawkish Fed repricing.
      • Cross: Safe-haven demand, global uncertainty boosting USD.
      • Levels: Support 119.00, Resistance 119.50.
    • EUR/USD:
      • Direction: Lower
      • Domestic (EU): Dovish ECB outlook weighing on the Euro.
      • Cross: DXY strength, US-DE 10Y widening.
      • Levels: Support 1.1600, Resistance 1.1700.
    • GBP/USD (Cable):
      • Direction: Lower
      • Domestic (UK): BoE reluctance, claimant count.
      • Cross: DXY strength, risk off sentiment, US-UK 10Y.
      • Levels: Support 1.2450, Resistance 1.2550.
    • USD/JPY:
      • Direction: Higher
      • Domestic (JP): BoJ remains dovish; intervention risk grows.
      • Cross: US 10Y surging, DXY strength amplifying the move.
      • Levels: Support 158.50, Resistance 160.00.
    • USD/CAD (Loonie):
      • Direction: Higher
      • Domestic (CA): CPI miss will trigger BOC dovish repricing.
      • Cross: DXY strength, watching US-CA 10Y spread.
      • Levels: Support 1.3700, Resistance 1.3750.
    • AUD/USD (Aussie):
      • Direction: Lower
      • Domestic (AU): RBA cautious, meeting minutes confirm dovish stance.
      • Cross: DXY strength, China growth concerns.
      • Levels: Support 0.6600, Resistance 0.6650.
    • NZD/USD (Kiwi):
      • Direction: Lower
      • Domestic (NZ): RBNZ easing bias entrenched.
      • Cross: DXY strength, risk aversion.
      • Levels: Support 0.5800, Resistance 0.5850.
    • USD/CHF (Swissy):
      • Direction: Higher
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response
      • Cross: DXY strength, safe-haven flows supporting.
      • Levels: Support 0.7850, Resistance 0.7900.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: sideways, EUR/JPY: higher, GBP/JPY: higher
      • Domestic: Relative hawkish BoE to ECB; JPY still dovish.
      • Cross: DXY strength, risk aversion affecting the crosses.
      • Levels: EUR/GBP: 0.8500-0.8550, EUR/JPY: 170.00-171.00, GBP/JPY: 193.50-194.50.
    • XAU (Gold):
      • Direction: Lower
      • Domestic (asset-specific): Rising real yields weighing on gold.
      • Cross: DXY strength.
      • Levels: Support $4,520, Resistance $4,560.
    • XAG (Silver):
      • Direction: Lower
      • Domestic (asset-specific): Industrial demand mixed, gold ratio flat.
      • Cross: DXY strength, risk aversion.
      • Levels: Support $31.00, Resistance $32.00.
    • WTI / Brent:
      • Direction: Sideways
      • Domestic (asset-specific): US-Iran talks weighing.
      • Cross: DXY strength, risk aversion muted.
      • Levels: WTI: $100-103, Brent: $108-112.
    • Copper:
      • Direction: Lower
      • Domestic (asset-specific): China growth worries, LME stock build.
      • Cross: DXY strength, global growth proxy weak.
      • Levels: Support $4.80, Resistance $4.90.
    • SPX:
      • Direction: Lower
      • Domestic (US): Rising yields, earnings season fades.
      • Cross: Elevated VIX, global risk concerns.
      • Levels: Futures support 5280, resistance 5300.
    • NDX:
      • Direction: Lower
      • Domestic (US): Rising real yields pressuring valuations.
      • Cross: Rate sensitivity elevated, VIX concerns.
      • Levels: Support 19,300, Resistance 19,400.
    • US30 (Dow):
      • Direction: Lower
      • Domestic (US): Earnings less supportive, cyclicals under pressure.
      • Cross: Bond yield reaction negative.
      • Levels: Support 39,800, Resistance 40,000.
    • UK100 (FTSE):
      • Direction: Sideways
      • Domestic (UK): Sterling strength offsetting global weakness.
      • Cross: Global risk tone, US weakness.
      • Levels: Support 8,350, Resistance 8,400.
    • DAX:
      • Direction: Sideways
      • Domestic (DE): German HICP eases, no bullish trigger.
      • Cross: US tech weakness, DXY strength.
      • Levels: Support 24,500, Resistance 24,600.
    • Nikkei:
      • Direction: Lower
      • Domestic (JP): JPY weakness hurting profitability.
      • Cross: US tech weak; no clear up catalyst.
      • Levels: Support 60,000, Resistance 61,000.
    • BTC:
      • Direction: Sideways
      • Domestic (asset-specific): ETF flow slowing, mixed on-chain data.
      • Cross: DXY strength, Nasdaq correlation weighing.
      • Levels: Support $66,000, Resistance $67,000.

    Positioning watch: Crowded longs in AUD (98th percentile) and Copper (98th percentile) expose these assets to significant downside risk if China economic data disappoints or trade tensions escalate. Crowded shorts in Nasdaq (0th percentile) face a squeeze risk if yields drop.

    The pain trade: A surprise dovish turn by the Fed, sparked by weak US data, would trigger a rapid unwinding of USD longs and a rally in equities, catching crowded shorts offside.