The G-10 rundown
USD – USDJPY and EURUSD have boosted the case for USD to turn for the worse, though the evidence elsewhere is mixed. Next week is a good testing ground for USD direction as we have a busy economic calendar.
EUR – Italy’s woes are a key focus, but EURUSD has posted a major reversal recently, rejecting the action below 1.1500. We need to see more positive euro developments for any move beyond 1.2000.
JPY – perhaps too early to call a reversal on USDJPY, but the ducks are lining up for the USD bears if the pair can punch through 110.00. Meanwhile, if a general unease in risk appetite is the salient theme, other JPY crosses (AUDJPY, for example) may offer more beta for JPY longs.
GBP – the hopeful developments on Brexit have neutralized the downside risk for now, and technically the 1.3000 area in GBPUSD looks like a bull/bear line of sorts, with similar for the 0.8900-50 area in EURGBP. Still, the situation looks a bit binary in coming months. A solid deal that keeps the UK de facto in the customs union, even if with a “pay to play” setup, would likely see a sharp sterling rally indeed.
CHF – EURCHF spiking back toward the lows, but would be surprised if Italy’s situation can see the pair make much progress beyond 1.1200. The Swiss National Bank will get more motivated to intervene from here given that level in EURCHF as USDCHF has also dipped sharply.
AUD – AUDUSD looking heavy into the lows for the cycle, but we’ve seen a steady pattern of new lows not holding well and plenty of backfilling, perhaps the side effect of crowded speculative positioning on the short side. The AUD the most sensitive of the G10, perhaps, to China allowing the CNY floor to drop out.
CAD – the 1.3000 area trying to hang in there as USDCAD has traced out a choppy descending channel. The bottom of that formation currently in the 1.2800-50 area, while the bulls need a sharp pull higher through 1.3100-50.
NZD – the kiwi outperforming the Aussie again here, even as rate spreads have moved against the smaller Antipodean’s favour. This is taking AUDNZD back near that pivotal 1.0800-50 zone
SEK – signs of a top in place for EURSEK, but we’ll need a Swedish election outcome that keeps the political centre intact, even if long term political questions remain after the September 9 vote.
NOK – some momentum divergence in EURNOK encouraging for the bears, but need another leg lower into 9.65 or so to get a sense the tide is turning for the too-weak krone.