The G-10 rundown
USD – the US dollar getting pushed back lower against risky currencies in line with the sentiment bounce – most charts have been so extended that this move could extend for a while without reversing fully the strong USD narrative.
EUR – a focus on EU bonds and the degree to which the euro can continue to get traction, though EURUSD is likely a low beta currency relative to other USD pairs if we look at how high the euro extended recently in many crosses.
JPY – the enormous Japanese GPIF pension fund upping its foreign bond allocation is “intervention by indirect means” from where we sit – estimates top $150 billion with US and EU markets the deepest for where the flows head.
GBP – sterling righting itself and showing its correlation with animal spirits – already staring down the important 1.2000 level in GBPUSD soon if this extends, though really there is plenty more space for a bounce to extend above that figure without reversing the recent epic slide.
CHF – the deluge of liquidity and bounce in risk sentiment finally turning EURCHF a bit more forcefully – but a lot of wood to chop to call any sort of trend reversal.
AUD – the Aussie bounce looks a bit sedate locally relative to the enthusiasm elsewhere – but has taken AUDUSD above the tactical bull/bear line. Next area there possibly 0.6250 – but not expecting to see the big move down reversed all in one go.
CAD – USDCAD downside can extend considerably if oil and risk sentiment stay buoyant, but still looking for reversal patterns to support fresh longs for a test of cycle highs eventually.
NZD – the kiwi underperforming AUD as we would have expected in a risk-on environment – the AUDNZD rally would need to extend well above 1.0300 to begin to point to a reversal.
SEK – SEK showing that it has become cheap as the price action in EURSEK is all the way back below the October highs – suggesting some diminishing returns in punishing EURSEK during bouts of risk off. One huge caveat on playing the SEK value story, however, the country is running a unique experiment with its more lax Covid19 quarantine policy relative to other EU counterparts – if the outbreak worsens there, it could require a massive “overcorrection” that hits Sweden’s activity level even harder.
NOK – the price action offering further evidence of stability – but that oil price needs a major recovery to get NOK out of the woods and have a hard time seeing significant move below 11.50 without forward crude oil prices picking up sharply – like 30% or more.