FX Update: USD firms with US long yield, FOMC on tap

The G-10 rundown

USD – the comeback is mostly only in evidence versus the weaker G10 currencies, as Asian and EM FX are still bid, perhaps on China trade deal hopes and on the generally positive risk appetite. No major shift in FOMC language expected, but December rate hike odds can’t help but shift tonight.

EUR – a break of 1.1500 in EURUSD is too much to expect ahead of the FOMC tonight and with US yields back on the rise. The 1.1300 and 1.1500 levels are the triggers for the next leg of action. 

JPY – as US yields go, so goes USDJPY at the moment, particularly with risk appetite in a better place. USDJPY has shifted above the 113.00-50 area, which remains the bull-bear pivot zone for now.

GBP – continues to push stronger even as it is now clear that no Brexit summit will take place, with the EU side saying that December is when a Brexit deal needs to happen.

CHF – USDCHF is not giving up on parity just yet after a struggle back and forth over that level – higher US yields supportive for now until proven otherwise. EURCHF is dormant below key 1.1500 area until we get a sense of the fate of Italy’s 2019 budget.

AUD – the barbecue of Aussie shorts continues as positioning got ahead of itself and perhaps on hopes that the US and China are headed toward détente. Meanwhile, signs of an ugly unwind in Australia’s housing bubble and the implications for a credit-drive growth slowdown abound, notwithstanding the Reserve Bank of Australia’s optimism.

CAD – the USDCAD chart is a study in indecision for now until we get a more pronounced technical or fundamental signal. Canada housing starts and house price data up later today that is compelling to watch for signs of further negative pressure.

NZD – the RBNZ’s Orr was all over the map in his comments, he still insists on maintaining a two-way policy potential and suggests that he would like to keep policy loose enough to push economic growth beyond potential. Still, somewhat NZD supportive that he claims to not be interested in the current level of NZD.

SEK – EURSEK finally breaking down today as Riksbank’s Ingves says it’s appropriate to soon start raising repo rate, which has the market looking for a December rate hike. Swedish house prices are showing year on year declines in recent months. I don’t envy the Riksbank’s task here and there will be egg on face on a housing debacle. For now, EURSEK finally breaking down below the 10.30 area and 200-day moving average and could achieve 10.10-10.00.

NOK – strong risk appetite is helping the smaller FX here and EURNOK is avoiding pressing too hard up on its 200-day moving average – downside looks like side of least resistance, especially if we get a bit of relief in the enormous slide in crude oil prices.

Upcoming Economic Calendar Highlights (all times GMT)

1315 – Canada Oct. Housing Starts
1330 – US Weekly Initial Jobless Claims
1400 – Mexico Oct. CPI
2000 – FOMC Rate Decision