Details Cookies
Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

FX Update: USD pulling to new highs FX Update: USD pulling to new highs FX Update: USD pulling to new highs

FX Update: USD pulling to new highs

Forex 6 minutes to read
John Hardy

Head of FX Strategy

Summary:  Markets are in a complacent mood, but further USD strength is ruining the mood for risk sentiment among the risky currencies. Next week looks important for further developments in the US-China trade policy showdown as well as due to the heavy macro event calendar.

Trading interest

  • Maintaining EURJPY shorts with stops lowered to 118.50. Targeting 112.00
  • Taking off AUDNZD longs for profit just ahead of our 1.0700 target – looking for re-entry next week on dips.
  • Long USDCAD with stops below 1.3230, for 1.3500+

Risk sentiment is a moving target across asset classes – a very strong session in the major equity markets yesterday suggests complacency and a good mood, but yields remain very low. In currency land, the stronger US dollar is turning the screws on carry traders, with EM FX on its back foot and most of the G10 small currencies at new cycle lows against the big dollar. USDCNY relatively quiet as the latest approach from the Chinese side seems to be a “3 bps a day” weakening schedule.

This week’s heavy US treasury auction schedule proceeded without much ado until yesterday saw the 7-year auction hitting a speed bump and then some.  The messy auction saw a bid-cover ratio of 2.17, by far the weakest result since 2009 and an interesting contrast to the very low yields out the curve, as well as US Treasury Secretary Mnuchin out yesterday mulling whether the US could begin to auction super-long US treasury bonds beyond 30 years. Next week only features short T-bill auctions, but the following week should prove more interesting, with 3-year, 10-year and 30-year paper on the block. Eventually, the rising US treasury supply issue will see the Fed needing to reintroduce massive QE.

This weekend is Labor Day weekend in the US and includes the September 1 start date for the latest round of Trump tariffs. Interesting comments from Chinese Commerce Ministry spokesman Gao Feng’s comments are behind much of the revival in hopes that the US and China are set to resume talks, but the comments aren’t very specific and don’t tell us whether the two sides will even talk next month, though a non-retaliatory stance from China’s side suggests that they aren’t interested in further escalation.

Next week’s heavy macro calendar includes the latest global PMI’s, US ISM surveys (Tue and Thu) and the Friday jobs data, while Australia’s Reserve Bank meets Tuesday, the Bank of Canada (most pivotal) meets Wednesday, and Sweden’s Riksbank meets Thursday.

Short EURUSD has been a great trade for patient carry traders who sell the rallies and don’t get too ambitious at periodic new lows. Every new low for the last year has quickly yielded to back-filling and no strong trending – this latest move lower may see similar price action if Fed activism picks up strongly (precisely because the US dollar continues to press higher – the USD being more in the driver’s seat than the Fed itself).

Source: Saxo Bank

The G-10 rundown

USD – the US dollar continues to grind stronger and risks maintaining this tendency until something is done to stop it by the Trump administration or the Fed, though the risk is that the Fed only reacts rather than pulls itself ahead of the curve.

EUR – the euro remains heavy and looks set to at least test the lows for the cycle and 1.1000, even if all new lows over the last year – and there have been several – never yielded to a major or even minor extension.

JPY – price action in USDJPY seems to be mimicking equity indices a bit more closely of late – interesting to see that both USDJPY and major US equity markets at key local resistance heading into next week’s heavy calendar.

GBP – sterling looks resilient here despite the uncertainty.  No deal Brexit opposition trying to gel across parties in a gambit to skirt Boris Johnson’s attempt to go it alone in negotiation with the EU, but their efforts face many hurdles.

CHF – EURCHF pushing at local resistance, possibly on the Italian political news as the awkward new coalition looks set to avoid elections that would have seen a Lega-led troublemaker for the EU in power.

AUD – the Aussie trades heavily after ugly 28.5% drop YoY in Building Approvals in July. Only a small minority believe that the RBA cuts next Tuesday – possibly fair given that the weak AUD is doing the heavy lifting at the moment – AU Q2 GDP up next Wednesday.

CAD – a pivotal week ahead for CAD as we await data and the Bank of Canada next Wednesday for a sense of whether the market is correct in assessing 30%+ odds that the Bank of Canada remains unchanged on its 1.75% policy rate through the December BoC meeting. Pivotal zone is 1.3300-25

NZD – AUDNZD bulls in good shape – big test next week with AU data and RBA Tuesday. NZDUSD looking near the big lows soon in 2015 below 0.6250.

SEK and NOK – plumbing new depths for the cycle versus the US dollar and EURNOK is slipping its grip on 10.00, while the Riksbank has a tall task in bringing any relief to SEK at next Thursday’s Riksbank meeting.

Upcoming Economic Calendar Highlights (all times GMT)

  • 0830 – UK Jul. Consumer Credit
  • 0830 – UK Jul. Mortgage Approvals
  • 0900 – Euro Zone CPI Estimate
  • 1230 – Canada Jun. (&Q2) GDP
  • 1230 – US Jul. PCE Inflation






The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.