Category: EU

  • Euro Still Struggling for Traction – Tuesday, 19 May

    Where we are: EUR/USD is currently trading near 1.1630, struggling to hold above one-month lows after dipping to 1.1625 overnight. The pair remains capped below its prior NY close around 1.1640, with bearish momentum prevailing after yesterday’s risk-off move. Immediate resistance lies at 1.1650, with support around 1.1610.

    What’s driving it: The Euro remains under pressure, weighed by the ECB’s dovish stance and persistent concerns over energy supply disruptions stemming from the ongoing Middle East conflict. The ECB, at its last meeting on April 17th, delivered a 25bp rate cut to 2.50% but retained a meeting-by-meeting approach, leaving the door open for further easing. This contrasts with the stronger hawkish signals emanating from the US, reinforcing the divergence trade; yesterday’s rise in US yields of +9bp on the 2Y and +12bp on the 10Y amplified that effect. Meanwhile, the rise in WTI crude continues to add to inflationary pressures in the Eurozone.

    • The recent Eurozone HICP data, showing headline inflation at 2.0% and core at 2.3%, offers only limited respite, as these figures remain above the ECB’s target and are vulnerable to energy-price spikes.
    • Speculator positioning in EUR remains modestly long at +40,200 contracts, which, while below the 50th percentile, offers scope for further downside as longs are washed out.
    • FT reporting suggests that markets still expect an 80% chance of a 25bp hike in the Eurozone, and it might be an overestimation given rising energy prices and ongoing military conflict.

    NY session focus: All eyes will be on the US Pending Home Sales data at 10:00 ET, though the primary driver for EUR/USD will remain the broader risk sentiment and the path of US yields. Watch for a potential test of the 1.1600 level on further dollar strength. Any sustained break below would open the door to a test of 1.1550. The working trade remains short EUR/USD on upticks. The pain trade for EUR is a surprise re-pricing of ECB hawkishness fueled by stronger-than-expected data or de-escalation in the Middle East conflict.

  • DAX Momentum Stalls as Inflation Eases – Tuesday, 19 May

    Snapshot: The DAX is trading around 24,550, fractionally higher on the day, struggling to extend gains after German HICP inflation eased to 2.0% YoY. The lower inflation print reduces pressure on the ECB to maintain its hawkish stance. Today’s catalyst will be US data at 08:30 ET.

    • A break above 24,600 would open the path towards prior highs.
    • Rising US real yields present a headwind, potentially pressuring the DAX if risk sentiment sours during the NY session.

    Bias into NY: Neutral. While the softer German inflation provides a modest tailwind, rising US yields and uncertainty surrounding the US-Iran situation will likely limit upside. We expect choppy trading between 24,450 and 24,600.

  • EUR/JPY Poised to Break Higher on BoJ Patience – Tuesday, 19 May

    Snapshot: EUR/JPY trades near 170.50, underpinned by the contrast between a still-dovish ECB and a cautiously hawkish BoJ. The ECB’s mild easing bias, evidenced by last month’s 25bp cut and retained meeting-by-meeting language, is the dominant driver. No high-impact US data is scheduled before the NY close.

    • Watch 170.75; a break confirms bullish momentum towards the year’s highs.
    • Yen weakness past prior intervention zones materially raises MoF/BoJ communication risk.

    Bias into NY: Bullish. The diverging central bank stances favour further upside in EUR/JPY, potentially testing 171.00; rising US yields, with the 10Y at 4.59%, add a tailwind to the move.

  • Euro/Sterling Remains Heavy on BoE Patience – Tuesday, 19 May

    Snapshot: EUR/GBP trades near 0.8530, little changed, as markets digest the BoE’s reluctance to cut rates aggressively. Focus remains on the UK labour market data due at 07:00 London. Claimant count change and Average Earnings Index will be key.

    • Watch for a break below 0.8520, which could trigger further downside.
    • Upside risk: A significant beat in UK earnings data could push GBP higher, weighing on EUR/GBP.

    Bias into NY: Bearish EUR/GBP. The BoE’s higher-for-longer stance, underscored by the 8-1 vote at the last meeting, continues to support Sterling; broader USD strength adds a mild headwind.

  • NY Session Tactical Brief – Monday, 18 May

    Regime: Risk-off, driven by rising real yields as 10Y TIPS push above 2% and oil climbs to $105, pressuring equities.

    Today’s market themes:

    • Real-yield repricing and inflation fears weighing on risk assets.
    • Geopolitical tensions in Middle East adding to oil supply concerns.
    • Watch for signs of USD/JPY intervention as pair tests 159.

    The setup: Rising real yields are the dominant driver, pressuring risk assets. Focus on the US 10Y TIPS yield, currently at 2%, as it sets the tone. A break above 2.1% could trigger further equity sell-off and dollar strength. Trade: short SPX futures, stop above 5300. Risk: surprising dovish Fed commentary.

    Watch list (native time per event):

    • 08:30 ET US Retail Sales (m/m) Forecast: 0.4%, Prior: 0.7%
    • 10:00 ET US NAHB Housing Market Index Prior: 51
    • 11:00 CET ECB President Lagarde Speaks

    Bias by asset:

    • DXY:
      • Direction: Bullish
      • Domestic (US): Hawkish Fed rhetoric, rising US yields
      • Cross: Risk-off sentiment, safe-haven demand
      • Levels: Support 117.80 / Resistance 118.30
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): Weak German data, dovish ECB comments
      • Cross: Stronger DXY, widening US-DE 10Y yield spread
      • Levels: Support 1.0800 / Resistance 1.0850
    • GBP/USD (Cable):
      • Direction: Bearish
      • Domestic (UK): Cautious BoE stance, weak data prints
      • Cross: Stronger DXY, risk-off flows
      • Levels: Support 1.2550 / Resistance 1.2620
    • USD/JPY:
      • Direction: Bullish
      • Domestic (JP): BoJ dovish, rising JGB yields, intervention watch
      • Cross: Rising US 10Y, DXY strength, risk-off
      • Levels: Support 158.50 / Resistance 159.00
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC holds, CPI is soft, rangebound
      • Cross: Stronger DXY, US-CA 10Y spread widening
      • Levels: Support 1.3650 / Resistance 1.3700
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): Hawkish RBA stance but crowded long positioning
      • Cross: Stronger DXY, weaker China growth, US-AU spread
      • Levels: Support 0.7050 / Resistance 0.7120
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ easing bias, weakening economic momentum
      • Cross: Stronger DXY, risk aversion, US-NZ yield divergence
      • Levels: Support 0.5800 / Resistance 0.5850
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB neutral, CPI contained
      • Cross: DXY strength, safe-haven unwinding
      • Levels: Support 0.7800 / Resistance 0.7850
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP Neutral, EUR/JPY Bearish, GBP/JPY Neutral
      • Domestic: Diverging central bank policies, relative yield spreads
      • Cross: DXY strength, risk regime dynamics
      • Levels: EUR/GBP 0.8500-0.8550, EUR/JPY 169.50-170.50, GBP/JPY 192.00-193.00
    • XAU (Gold):
      • Direction: Bearish
      • Domestic (asset-specific): Rising real yields, soft CB demand
      • Cross: Stronger DXY, risk-off environment
      • Levels: Support $4,500 / Resistance $4,550
    • XAG (Silver):
      • Direction: Bearish
      • Domestic (asset-specific): Weaker industrial demand, high Gold-Silver ratio
      • Cross: Stronger DXY, risk aversion
      • Levels: Support $30.00 / Resistance $31.00
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Tight supply, geopolitics, rising demand
      • Cross: Risk-off, inflation hedge
      • Levels: WTI Support $100 / Resistance $105
    • Copper:
      • Direction: Bearish
      • Domestic (asset-specific): Weak China, rising LME stocks
      • Cross: DXY strength, global growth concerns
      • Levels: Support $5.00 / Resistance $5.10
    • SPX:
      • Direction: Bearish
      • Domestic (US): Rising yields, Fed outlook
      • Cross: VIX elevated, global risk-off
      • Levels: Futures 5285, support 5250, resistance 5300 cash
    • NDX:
      • Direction: Bearish
      • Domestic (US): Real yields pressure valuations
      • Cross: Rates sensitivity, VIX
      • Levels: Support 18,100 / Resistance 18,300
    • US30 (Dow):
      • Direction: Bearish
      • Domestic (US): Earnings cyclical concerns, yields
      • Cross: Bond-yield reaction
      • Levels: Support 39,700 / Resistance 40,000
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Mixed data, Gilt yields
      • Cross: Global risk, US tone
      • Levels: Support 8,400 / Resistance 8,450
    • DAX:
      • Direction: Bearish
      • Domestic (DE): Weak German data, rising Bund yields
      • Cross: US tech, DXY, risk regime
      • Levels: Support 23,600 / Resistance 23,800
    • Nikkei:
      • Direction: Bearish
      • Domestic (JP): Strong JPY, rising JGB yields, BoJ stance
      • Cross: US tech, risk regime
      • Levels: Support 60,500 / Resistance 61,000
    • BTC:
      • Direction: Bearish
      • Domestic (asset-specific): ETF outflows
      • Cross: DXY, risk regime, Nasdaq correlation
      • Levels: Support $60,000 / Resistance $62,000

    Positioning watch: AUD and Copper are crowded long at >98th percentile, creating significant squeeze risk if US data surprises to the upside or China stimulus disappoints. Nasdaq is crowded short at the 0th percentile, vulnerable to a rally.

    The pain trade: A dovish surprise from a Fed speaker would ignite a risk rally, squeezing crowded short positions in Nasdaq and causing dollar weakness.

  • EUR/USD Remains Under Pressure as ECB Rate Cut Looms – Monday, 18 May

    Where we are: EUR/USD is currently trading around 1.1595, testing the lower end of its recent range. Overnight, the pair traded between 1.1585 and 1.1620. This level sits slightly below Friday’s New York close near 1.1610, signaling ongoing bearish pressure. A break below 1.1580 could open the door for further declines.

    What’s driving it: The dominant driver for EUR/USD remains the diverging monetary policy outlook between the ECB and the Federal Reserve, amplified by anxieties around the ongoing Middle East conflict. The ECB’s recent 25bp rate cut to 2.50% on April 17th and its mild easing bias are weighing on the Euro, especially as wage trackers soften and services HICP remains near 3%, reinforcing the case for a follow-up cut in June. This dovish stance is in contrast to a still-hawkish Fed, keeping upward pressure on the dollar. Rising mortgage costs in North America and Europe, partially attributable to the Middle East conflict, are also adding to the headwinds for Eurozone growth.

    • The ECB’s explicit mild easing bias, highlighted by the meeting-by-meeting language, keeps markets primed for further rate cuts.
    • Eurozone inflation, although still above the ECB’s 2% target at 3% in April, has shown signs of slowing, with both headline and core HICP figures declining in the latest print.
    • Speculator positioning in the Euro is modestly long, with net non-commercial positions at +40,200 contracts, representing 4.8% of open interest. This level is only in the 13th percentile, meaning there is relatively little risk of a major squeeze.

    NY session focus: All eyes will be on incoming US data releases throughout the NY session, though no specific high-impact figures are scheduled for 08:30 ET. Traders will be closely monitoring US Treasury yields and the broad dollar index for further directional cues. Key support for EUR/USD lies around 1.1550, with resistance near 1.1630. The trade that has been working is selling rallies into resistance, and that should continue until a clear shift in ECB rhetoric. The pain trade would be a surprise hawkish tilt from an ECB member, triggering a short squeeze and rapid re-pricing of ECB expectations.

  • DAX Faces Geopolitical Headwinds After HICP Drop – Monday, 18 May

    Snapshot: The DAX is under pressure, trading near 23,750 (-0.5%) following lower-than-expected German and Eurozone HICP prints indicating easing inflationary pressures, compounded by rising geopolitical tensions stemming from US-Iran war threats. Focus shifts to US data later today.

    • Watch 23,600 support; break opens a move to 23,400.
    • Escalating geopolitical tensions remain a significant risk, potentially triggering further risk-off sentiment during the NY session.

    Bias into NY: We lean bearish on the DAX below 23,800 as the combination of geopolitical risks and the tepid reaction to lower HICP suggests limited upside; a break below 23,600 would confirm the bearish setup.

  • Euro/Yen Faces Further Pressure as BoJ Rate Hike Looms – Monday, 18 May

    Snapshot: EUR/JPY is trading around 170.00, down 0.15, weighed by increasing speculation of a Bank of Japan (BoJ) rate hike following robust wage data. With the ECB retaining a mild easing bias and the BoJ hinting at further tightening, the policy divergence suggests continued pressure on the cross.

    • Key signal: Watch for a break below 169.50; sustained weakness there opens a path to 168.00.
    • Risk: Any dovish signals from the BoJ at the next meeting on April 30th (JST) could trigger a sharp Euro/Yen bounce.

    Bias into NY: Short EUR/JPY below 170.00, driven by the expectation of further BoJ normalisation and limited appetite for further ECB easing; a break of the recent low near 169.50 would provide confirmation.

  • Euro/Sterling Remains Rangebound Amid Diverging Central Bank Paths – Monday, 18 May

    Snapshot: EUR/GBP is holding steady near 0.8530, consolidating recent gains as markets weigh the diverging outlooks for the ECB and BoE. UK macro data continues to present a mixed picture, while the ECB is signalling further easing is possible. All eyes on the incoming US data at 08:30 ET.

    • Look for any upside surprise in services CPI or clear loosening in pay growth, which would tilt the next-meeting call dovish.
    • Geopolitical developments remain a risk, potentially triggering risk-off flows into safe-haven currencies.

    Bias into NY: Neutral, but favour selling rallies into 0.8550 given the BoE’s hawkish stance relative to the ECB. Rising US real yields are an external headwind for Euro/Sterling as well.

  • NY Session Tactical Brief – Friday, 15 May

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

    Today’s market themes:

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

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

    Watch list (native time per event):

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

    Bias by asset:

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

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

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

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

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

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

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

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

  • DAX Under Pressure as Inflation Fears Resurface – Friday, 15 May

    Snapshot: The DAX is under pressure, tracking broader European weakness, currently trading around 24,250, down approximately 0.8%. Declining German and Eurozone HICP figures have failed to inspire confidence, overshadowed by rising oil prices and geopolitical anxieties.

    • Watch for a break below 24,200, which could open the door for further declines.
    • Rising US-Iran tensions pose a significant risk to the downside, potentially exacerbating inflationary pressures.

    Bias into NY: We expect continued downward pressure on the DAX, targeting a move towards 24,000, fueled by persistent inflation concerns and a risk-off sentiment following the CNBC World report on renewed inflation fears.

  • EUR/JPY Bids Higher as BoJ Rate Hike Odds Firm – Friday, 15 May

    Snapshot: EUR/JPY trades near 170.80, up ~0.2% on the session, buoyed by rising expectations of a further Bank of Japan rate hike this year. Recent hawkish comments from BoJ board member Masu, alongside persistent yen weakness, reinforces the narrative of slow policy normalisation. Focus remains on spring wage data and potential MoF/BoJ intervention.

    • Watch 171.00 resistance; break opens the door to further upside.
    • Risk: Any signs of pushback from the Ministry of Finance on yen weakness could trigger a sharp reversal.

    Bias into NY: Bullish on EUR/JPY, supported by widening monetary policy divergence and the BoJ’s slow path to normalisation; a break above 171.00 targets 171.50. US 2Y yield near 3.98% provides limited headwinds to the upside.

  • Euro/Sterling Downtrend Resumes on BoE Divergence – Friday, 15 May

    Snapshot: EUR/GBP is trading around 0.8535, down 0.2% in early trade, driven by persistent hawkishness from the Bank of England relative to the ECB. The UK unemployment rate’s surprise drop to 4.9% continues to support Sterling, overshadowing earlier CPI concerns.

    • Watch 0.8500; a break confirms the bearish trend.
    • Risk: Services CPI re-acceleration could revive EUR bids.

    Bias into NY: Short EUR/GBP while UK wage growth remains sticky and services inflation elevated. Expect a test of 0.8500 driven by diverging central bank policy paths, with a dovish pivot from the ECB (last cut 25bp on April 17) contrasted against the BoE’s reluctance to commit to a cut path.

  • NY Session Tactical Brief – Thursday, 14 May

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

    Today’s market themes:

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

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

    Watch list (native time per event):

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

    Bias by asset:

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

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

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