• USD spec IMM long slips in Sep 8-14 reporting period nL1N2QJ1XD

• EUR slipped 0.33%, specs added 1,497 contract long increased to 27,805

• USD/JPY -0.54% in period, yen specs +2,030 contracts short now -60,295

• GBP rose 0.19%, specs +29,314 contracts, position flips to +4,790

• AUD -0.89% in period, specs sold 12,895 contract into dip, now -83,383

• BTC essentially flat in period, specs sold 93 contract now short1,187

The dollar extended its advance against the euro and other currencies on Friday on the assumption next week's Fed meeting will set the stage for tapering by year-end and shorten the expected timeline for rate hikes, helped by a spate of strong U.S. data.

The surprise rise in U.S. retail sales Thursday reinforced the uptrend in Treasury yields and the dollar, along with strong New York and Philly Fed reports, while Friday's tepid Michigan sentiment reading didn't dissuade those trends.

EUR/USD rose early Friday on a spike in euro zone government bond yields after the FT reported that ECB chief economist Philip Lane revealed in a private meeting with German economists that the ECB expects to hit its 2% inflation goal by 2025 nL1N2QJ0KL.
The ECB disputed that report.

Markets later dismissed the threat of the ECB actually raising rates more quickly than expected, two to three years out, as highly speculative and likely to be outpaced by the Fed starting late-2022.

Next week's Fed meeting is expected to show rate hike expectations shifting more toward 2022 from 2023 and 2024 and nodding toward tapering beginning before year-end, assuming non-farm payrolls rises accelerate from August's soft pace.

EUR/USD fell 0.34%, remaining near fresh 3-week lows of 1.1724, the 76.4% Fibo of the August-September rebound, and closing in on August's 1.1664 trough, after the early rise to 1.1789 on EBS.
Rejection of this month's highs by July's 1.1909 peak, plus IMM specs getting long around the time of August's price peak leaves bears in control.

EUR/USD and most other dollar pairings, except the yen, may remain under pressure while risk acceptance is challenged by Fed normalization and Chinese markets unease.

Sterling slid 0.37% on falling Gilt-Treasury yield spreads and stocks, as well as an unexpected drop in UK retail sales nL8N2QJ0RS, with BoE rate hike plans in focus next week nL1N2QJ15J.

GBP/USD broke below a recent uptrend prop that held Thursday, and the 50% Fibo of the August-September recovery at 1.3757.
Last week's swing low and the 61.8% Fibo are at 1.3727/21.
This week's aggressive topside rejection by several key tech hurdles nL1N2QI1T6 dims the outlook.

USD/JPY gained 0.18%, short of Monday and Tuesday's 110.16 highs and the cloud top at 110.19, losing altitude after the Michigan consumer sentiment index barely improved from August's lowest reading since 2011.
A drop in stocks triggered broader haven yen buying.

An upcoming change in Japan's political leadership is not expected to shift the BOJ's policy next week, but there is concern about Abenomics and the BOJ's enormous accumulation of JGBs and ETFs, given the 2% inflation goal looks potentially unattainable nL4N2QJ09R.

AUD/USD's retracement of its August-September recovery persisted with a 0.22% drop.
Tumbling iron ore prices and more recent setbacks in gold and copper amid Chinese growth nL4N2QJ09R and property market nL4N2QJ15H concerns pose headwinds to Australia recovery from pandemic shutdowns.

Ethereum fell roughly 4% and bitcoin dropped 1%.

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• Sterling weak into NorAm close -0.33% at 1.3747; Fri range 1.3811-1.3741

• Early NY rise post weak UK RS reversed, GBP/USD slides to 1-wk low by 1.3741

• US U.Mich, UK retail sales add to sterling woes nL1N2QJ15J

• Next week's Fed, BoE meetings to set tone amid potential policy changes

• GBP/USD supt at Fri low, then Aug 8's 1.3727 & lower 30-d Bolli at 1.3661

• Bears in control bulls need rise into daily cloud at 1.3826 to slow slide

• Significant res above 1.39 at upper 30-d Bolli (1.3911) and 100-DMA (1.3912)

• EUR/GBP ends NY near 'unched' at 0.8529; moves USD based after upbeat UMich data

Credit Agricole CIB Research discusses its expectations for next week's September FOMC policy meeting.

"We think that the FOMC may be only a month or so away from announcing QE taper and think that the updated staff economic projections and the Fed Chair Jerome Powell’s press conference would convey the message that the US recovery is becoming more durable. In addition, the updated Fed ‘dot plot’ would be scrutinised for any signs of more aggressive monetary tightening in the medium- to long-run. We think that the market impact from the meeting next week will depend on how investors perceive any signal that cautious policy normalisation is on the way," CACIB notes.

"We therefore think that the more lasting impact from next week’s policy meetings would be to weigh on global risk sentiment, especially if the Fed departs from its usual ‘patient’ message on QE taper and this gives the high-yielding safe haven USD a boost," CACIB adds. 

EUR/USD gave up earlier gains on Friday, hitting new lows for September, after speculation about a more aggressive ECB inflation view died down, leaving markets focused on resurgent strength in U.S. data and expectations that the Fed can more easily normalize policy than the European Central Bank.

With the Fed meeting next week, markets remained focused on Thursday's stellar U.S. retail sales data and strong New York and Philly Fed surveys this week, even though University of Michigan consumer sentiment was slightly disappointing nW1N2P605E.

The ECB disputed a story earlier on Friday that chief economist Philip Lane revealed in a private meeting with German economists that the ECB expects to hit its 2% inflation goal by 2025, which had contributed to euro strength.

The rekindled dollar strength could allow EUR/USD to retest August's 1.1664 trough nL1N2QJ18C.

Overall, data this week shored up Fed tapering expectations for 2021, boosting Treasury yields in the belly of the curve, where the bulk of issuance and QE exists, and pushing 5-year Bund-Treasury yields spreads and EUR/USD lower.

The FOMC's dot plots should shift toward sooner rate hikes, but taper may wait until the November meeting.

Meanwhile, one-year University of Michigan inflation expectations rose, reinforcing inflation expectations reported by the New York Fed nW1N2P605E.

For more click on FXBUZ

ANZ Research sees limited upside for AUD and fellow commodity FX in the near-term.

"We think challenges in emerging markets –in terms of China’s asset-market volatility and growth –are likely to continue to weigh on sentiment amid deleveraging and sectoral adjustments. Despite being above trend, we expect growth momentum in developed markets to be mixed, with US growth vulnerable given relatively low vaccination rates," ANZ notes. 

"On net, the muted growth impulse, alongside modestly tighter liquidity is likely to leave the AUD and its fellow commodity currencies in a bind for some time," ANZ adds. 

Sterling fell on Friday, falling to session lows after strong U.S. University of Michigan consumer and one-year inflation expectations nL1N2QJ18C after initially being weakened by disappointing UK retail sales data nL8N2QJ0RS.

Sterling losses were cushioned somewhat during U.S. morning trade by profit-taking on recent GBP/USD shorts ahead of upcoming Fed and BoE meetings.

The recent resurgence in U.S. data and below-forecast UK retail sales data may temper recent hawkishness by the BoE Governor Andrew Bailey nS8N2OX08U and others, potentially pushing UK rate hike expectations further out the curve 0#FSS: and narrowing the gap with the U.S. outlook.

Sterling has been probing trendline support off of August and September lows below 1.38 for the last two days.
A close below trendline support at 1.3794 would give further momentum to bears, opening the way for a run toward September 8's low of 1.3727 and lower 30-d Bolli support by 1.3663.

Should Fed and BoE rate hike expectations converge further, GBP/USD's near 1% gain in 2021 would likely evaporate as traders target the Jan.
11 2021 low at 1.3451.

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TD Research discusses AUD/NZD and sees a scope for upside, noticing that the RBA-RBNZ policy divergence looks discounted in the cross.

"AUDNZD continues to be a one way bet with the cross registering fresh lows sub-1.03 off the back of AU/NZ data surprises. We think the cross is nearing pricing in peak macro and policy divergence. That said, topside may still be premature until the RBNZ commences tightening this fall and settles the 25bp vs 50bp debate. Historically, the latter is a rare occurrence," TD notes. 

"We think patience will be needed before a topside move can be realized in AUDNZD. As we note in our global FX monthly, HFFV strategies have been rewarded in our framework, and we track only a modest discount on our cross-asset FV gauge at the moment. There are some drags in AUD that limit a topside move in the cross for now, but we note some appreciable offsets," TD adds. 

Danske Research discusses its expectations for next week's FOMC policy meeting.

"The Fed is in a difficult position amid slower growth and still high inflation. Given the weak jobs report and lower-than-anticipated inflation in August, we expect the Fed will refrain from providing more details at this meeting, as the Fed has already made it clear that tapering is set to begin before year-end. We believe the tapering pace is more important than the timing. We continue to expect that tapering will be concluded in mid-2022. We expect the Fed to raise the ‘dots’ by signalling the first rate hike in 2022 (up from 2023 currently). We still expect the first rate hike in H2 2022 in either September or December," Danske notes.

"The continued push towards tighter global liquidity conditions (Chinese deleveraging, ECB fading PEPP and Fed tapering) is positive for the dollar. We continue to see downside risks to EUR/USD over the coming year, targeting 1.15 in 12M (1.13 in 15M),' Danske adds.

• Cable has traded a 35 pip range thus far Friday, 1.3776-1.3811

• The base of that range is 11 pips shy of Thursday's one-week low

• Drop to 1.3765 was spurred by unexpectedly positive U.S. retail sales data

• UK Aug retail sales, by contrast, were unexpectedly negative nL8N2QJ0RS

• FOMC and BoE MPC meetings next week nL4N2QH3FLnL8N2QI45GnL8N2QI4O0

• Dutch PM not proposing new EU-UK security deal, EU says nL8N2QJ27I

• There are some huge FX option strikes expiring in wake of FOMC on Thursday

• Cash hedging can often attract if price is near strike as expiry looms

• GBP/USD has £532-million at 1.3700, 738-million 1.3800, £381-million 1.3900

• EUR/USD has 2.8-billion euros at 1.1700, 1.5-billion at 1.1750

• A further 1.7-billion euros reside between 1.1790-1.1800 next Thursday

• Options primed for Fed volatility, but unlikely to be sustained nL1N2QJ0F6

For more click on FXBUZ

• AUD/USD reaches 0.7317 after extending north from 0.7282 (Asian session low)

• 0.7282 was eight pips shy of Thursday's three-week low nL1N2QI2UU

• Risk-sensitive AUD supported by PBOC's liquidity injection nB9N2PM02O

• Hang Seng closed up 1% nAZN182B00nL8N2QJ13S. European stocks rise

• See: nL4N2QJ1KN. Big 0.7300 and 0.7325 option expiries today nL1N2QJ0A6

• Australia at centre of Indo-Pacific alliances to counter China nL4N2QJ0GQ

• Since June Fed EUR/USD traders have slashed net bets on EUR/USD rising

• Traders have established a big short position ahead Sep 22 Fed

• Week ending Jun 18 after Fed's hawkish surprise EUR/USD ended 1.1847

• This week EUR/USD opened 1.1846, last 1.1770 after yest's 1.1751 low

• Option vol has dropped to its lowest since early Fed 2020, pre turmoil

• In Aug EUR/USD met the minimum correction target for its 2020-2021 rise

• Aside from sweeping changes in betting, very little has changed

• FX traders' first move after Fed may be to re-establish bets nL1N2QI0QL

• 
  

• FX options expire 10-am New York/3-pm London - Friday September 17

• EUR/USD: 1.1745-50 (1.8BLN), 1.1795 (395M), 1.1800 (1.2BLN)

• USD/CHF: 0.9110-25 (345M)

• GBP/USD; 1.3730-45 (271M), 1.3760-70 (254M), 1.3880 (211M)

• AUD/USD: 0.7300 (1.1BLN), 0.7325 (1BLN), 0.7395-0.7410 (530M)

• USD/CAD: 1.2635-50 (1BLN), 1.2700 (1BLN), 1.2745-60 (1.6BLN)

• USD/JPY: 109.50-65 (500M), 109.80-90 (534M)

• EUR/JPY: 128.30 (400M)

  
  

For more click on FXBUZ

• Long lower candle shadows continue to highlight demand on dips

• Bad news for our 0.8509 short play but price is back below its cloud

• Cloud base at 0.8529 and Thurs high at 0.8546: initial resistance

• 14-day momentum remains negative and RSI diverging bearishly

• We will maintain a stop above the 0.8560 cloud top and target 0.8305

• Weekly action bearish but doji risk/market uncertainty is increasing

  For more click on FXBUZ

• Touch softer in a 1.3784-1.3798 range with only occasional interest

• Difficult BoE rate decision Sep 23rd amid lower growth and high inflation

• Two MPC new members and end of furlough adds to uncertainty nL8N2QI45G

• Focus likely on forecasts and the tone of comments rather than policy change

• Charts; momentum studies crest, 5, 10 & 21 DMAs coil - neutral setup

• Tested 1.3900 Tuesday and retreated hard - suggests major 1.3910 resistance

• 1.3757, 50% of August-September rise and 1.3727 Sep low are initial support

• 1.3765 NY low and London 1.3841 high are initial support and resistance

For more click on FXBUZ

• -0.1% after a bearish outside day after on broad based U.S. dollar strength

• Australia agrees increased U.S. air deployments after sub deal nL1N2QI2JT

• Aus gov't proactive on foreign policy after slow, delayed vaccine rollouts

• Dalian iron ore futures fell 8% Thursday, -19% this week - weighs on AUD

• Aus coal mines risk becoming stranded after 2030 - RBA study nL1N2QI0MV

• Charts; momentum studies, 5, 10 & 21 DMAs conflict, 21 day Bolli's contract

• Thursday's close below 0.7323 21 DMA targets the 0.7176 lower Bollinger band

• NY 0.7274-0.7304 range is initial support and resistance

For more click on FXBUZ

• +0.05% after closing -0.35%, as broad retail sales led USD strength weighed

• Slower growth, high inflation make decisions difficult for BoE nL8N2QI45G

• End of the furlough program on Sept 30th will complicate BoE decisions

• Suggests BoE caution short term - Nov tightening, if inflation remains high

• Charts; momentum studies conflict, 5, 10 & 21 DMAs contract- neutral setup

• Tested 1.3900 Tuesday and retreated hard - suggests major 1.3910 resistance

• 1.3757, 50% of August-September rise and 1.3727 Sep low are initial support

• 1.3765 NY low and London 1.3841 high are initial support and resistance

  For more click on FXBUZ

• Touch softer after closing down 0.4% on broad based USD strength

• Strong U.S. retail sales pushed UST yields higher on Fed taper fears

• ECB's Lane believes 2% inflation target may be met by 2025 nL1N2QI2TH

• 1.1745/50 1.779 BLN, 1.1770/85 862 MLN and 1.1800 1.234BLN close strikes

• Charts; momentum studies ease, 5, 10 & 21 day moving averages conflict

• 21 day Bollinger bands contract - mixed signals with USD in the driving seat

• Close below 1.1802 21 DMA targets the 1.1712 rising lower 21 day Bolli band

• NY 1.1750-1.1771 range is initial support and resistance

For more click on FXBUZ

• AUD/USD opens 0.5% lower as fears of slowdown in U.S. economic growth ease

• U.S. retail sales surprise to upside in strong boost to economy nL1N2QH2FM

• Raises expectations that Fed will signal tapering at next week's meeting

• Diverging Fed/RBA rate expectations weighs on AUD nL1N2QG077

• Slump in metals prices AUD negative; copper down 2.6%, Dalian iron ore -3%

• Australia's new US-UK security pact risks China trade nL4N2QI07F

• Support 0.7270-75, 0.7245-50, resistance 0.7320-25, 0.7345-50

• For more click on FXBUZ

Standard Chartered  discusses its expectations for next week's FOMC policy meeting.

"The 22 September FOMC will likely signal a tapering decision at the next meeting, providing few details. The dots will likely signal one 2022 hike, and two added hikes in both 2023 and 2024. The risk skew is for more rather than less hikes; the added hawkish lean in not fully priced, in our view," SC notes. 

"The USD could find short-term support on a hawkish tilt and any risk-off reaction," SC adds. 

• GBP/USD dived to 1.3765 by recent up TL & 50% Fibo support nL1N2QI1T6

• Big US retail sales recovery and early stocks slip were early weights

• Pair off lows and down 0.36% last as Tsy yields crest, stocks bounce

• Sterling is sensitive to stocks, global risk, particularly sell-offs

• The 1% drop from Tues's peak at huge resistance eyes UK retail sales Fri

• The BOE's faster tapering and expected rate hike timing vs Fed is a plus

• Hopefully next week's Fed and BOE meeting will help hone that outlook

For more click on FXBUZ

The dollar gained roughly 0.5% against the euro and the broader index of major currencies after a stunning rebound in U.S. August retail sales pushed Treasury yields higher and reinforced the view next week's Fed meeting will keep tapering high on the agenda.

Though the retail sales were marred by hefty downward revisions to July's figures, dollar gains were widespread, reinforced by a September Philly Fed business index nN9N2NL01R that soared over expectations, corroborating Wednesday's far-above-forecast Empire State report.

The data alleviated anxiety about the economy slowing, which arose after weak August non-farm payrolls and below-forecast CPI.

Treasury and dollar gains were tempered somewhat by the fact that the biggest source of retail sales growth was from non-store sales and that services, which are most affected by the pandemic, are not included in the monthly report nL1N2QI1MX.

Initial jobless claims edged higher and continued claims tumbled 187,000, though the data may skewed by seasonally adjustments thrown off by last year's school closures and hurricane Ida.

A hawkish Sept.
21-22 Fed meeting could push EUR/USD toward August's 1.1664 lows nL1N2QI1GM, especially after the euro failed to surpass July's high during this month's rally.

Sterling fell 0.36%, though it held the uptrend line support off the Aug.
27 and Sept.
8 pullback lows by Thursday's 1.3765 low.
That support sits just above the 50% Fibo of the August-July 1.3602-1.3913 recovery at 1.3758.

If Tuesday's 1.3913 recovery high had not been roundly rejected by a cluster of crucial resistance nL1N2QI1T6, Thursday's dollar-led slide would be less imposing.
That bearish rejection places added weight on UK retail sales Friday, the FOMC on Wednesday and Thursday's BOE meeting -- as well as overall risk appetite reflected in global stocks.

USD/JPY was up 0.3%, recovering from Wednesday's intraday breach of weekly chart supports in line with Friday's post-data bounce in Treasury yields.
The 109.83 high on EBS was by the daily kijun and near the middle of September and August's ranges.

The haven yen held up better than most currencies against the dollar's advance due to lingering concerns about the pandemic and supply chains in Asia.
Hot Japanese export growth may also be cooling quickly as a result pandemic disruptions nL4N2QG1AH.

AUD/USD fell 0.56%, with disappointing Australian jobs data nL1N2QI038 kicking off the drop that strong U.S. data extended to its lowest in three weeks.

Worries about China extended the slide in iron ore prices, a problem for Australia's biggest export, and copper fell over 3%, while crude oil consolidated recent gains and nat gas fell 3.25%.

Bitcoin and ethereum were marginally lower, consolidating this week's rebound.

Michigan consumer sentiment for September tops Friday's U.S. data calendar, but Wednesday's Fed meeting is the primary focus.
New economic and rates projections may add some granularity to Fed tapering and rate hike market pricing.

For more click on FXBUZ

• Broad based US$ buying sinks EUR/USD in Europe, NY opens near 1.1770

• US interest rates, US$ rally on big upside data surprises nL1N2QH2FM

• EUR/USD falls further, trades to 1.17505 on EBS before slightly bouncing

• US$ bid persists after Europe's close, EUR/USD near the low late in the day

• Techs are bearish; Pair below daily cloud, 21- & 50-DMAs, RSIs falling

• Monthly inverted hammer candle suggests EUR/USD shorts are in charge

• US data lengthens list of EUR/USD downside risks nL1N2QI1GM

• For more click on FXBUZ