Global Head of Macro Strategy
Summary: The US dollar has put back on its rally hat, let’s see if the US jobs report Friday can finally spark some more notable range expansions, perhaps only possible if the US treasury market also wakes up on the data release, or for whatever reason.
The data out of the US remains neutral to benign, the latter including Wednesday’s JOLTS report that contained more good news (Quits and Layoffs) than bad (lower headline openings) and a strong rebound in the ISM Services, particularly the employment component rising clear of 50 for the first time since May. It’s difficult to see how today’s US December jobs report changes the narrative and a solid report could encourage an extension in what looks like a US dollar resurgence. Even more difficult to understand is the reaction function to Supreme Court rulings that may be announced today on the legality of Trump’s tariffs. The court doesn’t preannounce which cases it will rule on, so we may remain in the dark for now.
Elsewhere, geopolitical developments are an absolutely blizzard, with Trump claiming he is set to make land incursions against Mexican drug cartels, Iran on fire and turning off its internet as Turkish Airlines cancelled its Istanbul-Tehran flights, the China and Japan tiff escalating over Japanese Takaichi comments on Taiwan as China is cutting off exports of rare-earth minerals and related products to Japan.
Within risk sentiment, although the US main averages have stumbled over the last couple of session, the average stock is doing well – key to get a ready on overall risk sentiment as earnings season in the US kicks off next week, with the big tech- and AI names coming the weeks following. And credit spreads on high-yield bonds are within a few basis points of the tightest levels since 2007.
Chart focus: USDJPY
The consolidation in the USDJPY rally has seen a coiling within the range, with the market generally ignoring the still fairly dramatic moves in Japanese government bond yields (first higher and than some sharp consolidation this week on the soft November Japanese wage data). In short, a close back above 157.89 here and we’ll be set for a challenge of the upside levels into 160.00+ and all wondering where Japan feels it will want to intervene. Judging from the lack of urgency thus far, the intervention risk may only escalate severely north of that psychological level. Key for the follow-on action today will be the US jobs report reaction and whether US treasury yields breakout of the recent range.
EURUSD – This latest slide is all unfolding in slow-mo, after the Monday attempt to rally from the Venezuela-inspired sell-off. A full breakdown to sub-1.1600 levels after today’s US jobs data would reset the trend focus lower to the range lows below 1.1500 and possibly beyond.
JPY pairs – the JPY reverts back to weakness after what proved a very shallow consolidation outside of USDJPY thus far – important short-term for the JPY bears to get a weak flourish to end the week – a break higher in US treasury yields might help do the trick.
GBPUSD and EURGBP – EURGBP consolidation peaked out yesterday, establishing an important resistance level (0.8700) for the bearish view. But GBPUSD after the sharp tumble from new multi-month highs on Tuesday – small local support at 1.3415 area is last realy area of note to stave off a test toward 1.3000 if the US dollar shifts to breakout mode here.
AUDUSD and AUD pairs – AUD has disappointed after the prior bout of strength. The high momentum reversal after posting highs since 2024 suggests the risk of a plunge deep back into the range if this move in AUDUSD below 0.6700 holds post US-data today.
USDCAD – The bear trend at risk of complete neutralization here if the US dollar strength persists post-US and Canadian jobs reports today.
FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.
The trading ranges remain ice-cold – look at NOK’s reading of 999 for the ATR ranking – this is the single lowest volatility reading of the last 1,000 trading days, in other words. But look at the US dollar momentum – so far we have only seen a strong comeback even if we aren’t in an uptrend yet. Elsewhere, AUD momentum has faded, while the CNH reading still looks strong even if the chief pair of interest – USDCNH – is stuck just below 7.00 for more than a week.
Table: NEW FX Board Trend Scoreboard for individual pairs.
Two USD pairs “on tilt” for a cross into bearish trending territory today – NZDUSD and EURUSD. The EURCHF pair is on tilt as well, though it has been locked in a range for an eternity. USDCHF a more interesting look if the USD set for a broader uptrend here.
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Saxo Group
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Global Head of Macro Strategy