The G-10 rundown
USD – again, the reaction function to weak US data not entirely clear, but would be more so if we get particularly bad US data with weak risk sentiment, which likely drives more USDJPY downside, potentially EURUSD upside, while less supportive for risky currencies versus the greenback.
EUR – The modest recovery in EURUSD becomes more challenging for bears if 1.1000 is taken into the end of this week (would create a solid bullish weekly candlestick reversal pattern), but a more profound local reversal requires 1.1075+
JPY – the yen in a good position to continue strengthening here if US data is bad and the risk sentiment also weakens.
GBP – the EU is not satisfied with Boris Johnson’s plans thus far and will make a decision in a week on whether there is anything to salvage from ongoing negotiations. If no deal is achieved, a UK constitutional crisis is set in motion as Johnson tries to take the UK out without a deal, while the parliament will do what it can to make good on the law it passed to prevent Brexit without a withdrawal agreement. Sterling downside risks unless Johnson pulls a rabbit out of his hat on deal.
CHF – one of the more interesting developments over the last couple of sessions has been the ability of EURCHF to rally despite the Brexit uncertainty and stronger JPY/lower yields. Upside EURCHF optionality worth owning in case this is an early sign that the market sees absolute zero having been more or less reached in EU yields.
AUD – interesting to see the reversal of AUDUSD sell-off post-this week’s RBA cut, and a close north of 0.6750 creates a bullish weekly candlestick reversal. Still, the pair requires heavy lifting to reverse the well established bear trend, and global growth concerns are not an environment in which the AUD can be expected to thrive.
CAD – CAD not behaving like its commodity dollar peers as US weakness deals a fresh blow to the Bank of Canada outlook, which was otherwise complacent recently. The technical recovery above 1.3300 sets the focus higher in USDCAD and risk of further underperformance in the crosses.
NZD – scoping out levels for re-entry in long AUDNZD positions – real value doesn’t show up until 1.0600 or even a bit lower unless we see isolated negative NZ developments.
SEK and NOK – the Scandies twisting in the breeze on concerns for the global growth outlook – we need a bolt from the blue on fiscal stimulus or a sense that the EU is turning the corner to avoid new lows for the cycle for both currencies.
Upcoming Economic Calendar Highlights (all times GMT)
- 1230 – Canada Aug. Intl. Merchandise Trade
- 1230 – US Fed’s Rosengren (Voter) to Speak
- 1230 – US Sep. Change in Nonfarm/Private Payrolls
- 1230 – US Sep. Unemployment Rate
- 1230 – US Sep. Average Hourly Earnings
- 1230 – US Aug. Trade Balance
- 1400 – Canada Sep. Ivey PMI