The G-10 rundown
USD – the US dollar is still firm against the lowest yielding currencies and to a degree versus the euro, but not cutting much of a profile elsewhere, as strong risk appetite supports interest in risky EM trades. At this point, as we discuss above, we are unwilling to call a top, but the risk/reward is certainly not what it used to be.
EUR – the air is slowly leaking out of EURUSD, with potential for a stress-test of the 1.1300 range low if US data refuses to cooperate with the increasingly bearish economic outlook and US yields rise further this week.
JPY – Mostly focused on US yields as a coincident indicator for more upside potential in USDJPY beyond 110.00. Note this post from Wolf Street describing the BoJ’s odd tapering policy, in which they increase their balance sheet for two months running before actually shrinking it for the following month. Whatever it is doing – it’s not working. Try again.
GBP – GBPUSD resting right on its 200-day moving average and it would prove a psychological blow if the pair can’t maintain above 1.3000.
CHF – CHF likely a fellow traveller with the JPY here – as we watch for upside potential in EURCHF and USDCHF mulls the psychologically important parity level (range high above 1.0100 more important and would fit well with the 1.1300 in EURUSD.
AUD – we discuss AUD above and important to underline that the market’s assessment of RBA trajectory hasn’t shifted one bit, so happy to pounce on the negative side if this rally fades now, otherwise may have to sit on our hands for a negative outlook on the currency.
CAD – AUDCAD, a focus pair, likely to follow AUDUSD directionally on whether RBA not clearing dovish bar and royal commission report has a sustained impact. USDCAD for its part remains heavy with crude oil prices still near local highs.
NZD – NZD finding resilience on the strong risk appetite - theoretically further upside potential if rose-tinted glasses stay on for risk takers, but New Zealand yields going nowhere and we would prefer to fade NZDUSD upside until that changes – though no real technical hook for a downside hook just yet.
SEK – EURSEK dribbling up above 10.40 looking locally strong but still in the shadow of the big 10.72 top and reversal. Would rather sell than buy EURSEK in the big picture, but would like to see at least a modest technical hook first.
NOK – EURNOK comes back lower after yesterday’s spike – a mirror image of yesterday’s oil market moves. GDP report up on Friday. Upcoming Economic Calendar Highlights (all times GMT)
1500 – US Jan. ISM Non-manufacturing
1800 – US 3-year Treasury Auction