The G-10 rundown
USD – the US dollar seems the flipside of the thaw in risk sentiment and rise in global yields here – and EURUSD poised right at tactical resistance zone below 1.1100 ahead of tomorrow’s ECB meet.
EUR – the euro is weak in the crosses as the market looks for Draghi and company to impress on some level with new easing, but expectations may be excessive. One scenario is that a insufficiently dovish ECB sees the euro higher versus EM and smaller G10 FX and lower versus the USD and JPY tomorrow.
JPY – the steep back up in yields and solid risk sentiment driving a consolidation in the JPY, driven even further by heavy long yen speculative positioning. USDJPY has effectively taken out the local resistance at this point and a further rise in yields could drive a squeeze to 109.00
GBP – headline risk for the next several weeks on Brexit overrides other considerations and GBPUSD looks particularly aggressive as it will soon run into key resistance in the 1.2400-1.2500 area.
CHF – the franc caught between wanting to weaken on the backup in global yields and wanting to stay firm against the euro as the ECB is set to ease tomorrow. Through it all, long yields likely to drive EURCHF direction tomorrow.
AUD – the Aussie has backed up higher on the higher yields and risk sentiment drivers discussed above and hopes that the US and China are set for a trade negotiation breakthrough. Doesn’t feel like we are at the end of the cycle of AUD weakness yet, but if AUDUSD backs up much further, the technical would suggest otherwise.
CAD – an FT article reminding that the CAD is the strongest G10 performer against the US dollar this year – impressive but questioning the sustainability - a weaker US economy together with the usual suspects weak risk sentiment and weak oil prices the greatest risk to this outperformance.
NZD – the backup in yields in NZ less pronounced than elsewhere – watching whether the resistance int eh likes of NZDUSD comes in soon (the move correlated with the backup in yields/JPY crosses/drop in gold, etc..) ahead of the important 0.6500 area resistance. AUDNZD upside outlook still hanging in there but needs a catalyst.
SEK – what a day for the krona yesterday, first reversing viciously back higher on the very weak CPI print, only to see EURSEK push almost 900 pips back lower – still a chance for bears there is risk sentiment remains stable and the euro is offered post-ECB tomorrow.
NOK – the price action here less choppy than in SEK yesterday and strong oil price supporting at the margin. The Norway regions survey was solid yesterday and Norges Bank may be set to hike rates again next week if everything is just right with markets.
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