The G-10 rundown
USD – the August jobs report was not encouraging, but odds are dropping for a 50 bp move from the Fed next week as the immediate threat of trade war escalation between the US and China has faded. The US dollar has reversed back lower after a surge to new highs last week – the situation looks technically pivotal right now for the greenback and will remain so through the September 18 FOMC meeting.
EUR – before judging that the euro looks firm versus the US dollar and the yen, have a look at EURCAD and other EUR/risky crosses, which suggest that the market is looking for strong easing from the ECB – these may be the most prone crosses to a severe correction in the event the ECB disappoints on the hawkish side.
JPY – the yen on the defensive as risk sentiment has improved and bond yields have backed up. For broader JPY outlook, watching the 107.00 area in USDJPY for whether the yen remains the weakest of the weak here.
GBP – sterling is not out of the woods yet – thought technically, the EURGBP reversal is impressive. Very headline driven.
CHF – prospects for ECB easing holding EURCHF down, while risk sentiment and yield back-up driving in the opposite direction. Seems time for a consolidation, especially if yield consolidation higher continues.
AUD – the Aussie trying to mount a comeback here, finding fuel on crowded short positioning and the prospects for US-
CAD – if equities continue to stage a comeback here and risk sentiment finds encouragement from the ECB and then next week’s FOMC meeting (even more important) potential for USDCAD to test all the way to 1.3000.
NZD – AUDNZD seeking out local support and so far finding it not far below 1.0650 – AU/NZ yield spreads continue to point the needle higher for the pair as the next hurdle is the 1.0700+ area recent highs for a possible go at 1.1000
SEK – the resurgent risk appetite and solid PMI data out of Sweden last week boosting the SEK and have EURSEK challenging the key pivot area below 10.65 that could open for 10.50 and more if the good mood continues across markets.
NOK – Solid GDP print this morning has EURNOK digging lower below first key area around 9.90, but bigger breakdown requires taking out the 9.80-75 area: probably a full recovery in risk sentiment and hopes on the other side of the ECB and FOMC meetings that the central banks are getting ahead of the curve needed for significant EURNOK downside traction to develop.
Upcoming Economic Calendar Highlights (all times GMT)
- 0830 – UK Jul. Manufacturing Production
- 0830 – UK Jul. Trade Balance
- 0130 – China Aug. CPI
- 0130 – Australia Aug. NAB Business Survey