The G-10 rundown
USD – the back-up in bond yields earlier this week offered a chance for the US dollar to shine, though we never got more than a one-session hitch in equity markets, so the narrative that the US will lead the world to reflation has not yet been properly challenged. Yesterday’s high US CPI reading, if it is a sign of things to come and does not see other countries following suit, in fact amplifies the US negative real rates story (risk of inflation rising while policy rate seen rising only very far down the road.).
EUR – the chief hurdle here for EURUSD bulls is the level of positioning, which suggests the going higher could be heavy here even if the trend continues in that direction. As well, the lack of Fed balance sheet growth is an off-note in the background - but bears have no technical case for a sell-off just yet.
JPY – the yen scraping bottom as today’s session developed as safe-haven bonds are weakening ahead of the US 30-year auction later today.
GBP – positive noises from UK Brexit negotiator David Frost on the ability to reach agreement on post-Brexit transition period in September, but EURGBP is stuck in the middle of the range established as far back as June after the UK reported the worst GDP growth of any major economy from COVID-19.
CHF – EURCHF is treading water – interesting to note the relative stability of CHF during the market volatility earlier this week – possibly a sign that CHF less likely to trade as a safe haven from here – especially when precious metals (and possibly US stocks – gold and tech stocks are large SNB holdings) volatility is the source of concern.
AUD – the Aussie can’t catch a major impulse in either direction here – iron ore and other metals prices have stalled out – technical rout danger only picks up, however, if AUDUSD punches down through 0.7050-00.
CAD – strength here beginning to look overdone – though I think the AUDCAD repricing and even more so NZDCAD repricing looks fair. Next area for USDCAD is 1.3000 if this move below 1.3350 sticks.
NZD – the weakness well deserved and could extend with COVID-19 back in New Zealand and requiring an Auckland shutdown (was the outbreak triggered by refrigerated product shipments?) and with the RBNZ this week declaring that it is in “active preparation” for negative rates.
SEK – the EURSEK sell-off pausing for breath near the key sub-10.22 range lows, needing constant risk sentiment and vaccine hopes to support an extension toward 10.00. Note that 200-week moving average (currently 10.21) has come into view – EURSEK broke above this average after a couple of false starts in early 2014 (the average below 9.00 at the time).
NOK – the 200-day moving average in EURNOK has given away again, but 10.50 the likely psychological focus as we only have one daily close below that level since the COVID-19 crude oil meltdown.