• AUD/USD traded 0.7103-0.7133 overnight, hit a 2-1/2-month high ahead of NY's open

• NY opened near 0.7125, the pair traded heavy for most of the NY session

• The overnight low was hit in early NY, the pair then rallied toward the overnight high

• Upward moves in gold, silver, copper & equities helped the lift but sellers emerged

• Firm US yields , USD buying, USD/CNH lift off its low weighed on AUD/USD

• The pair near 0.7110 late, AUD/USD traded down -0.18% in NY's afternoon

• Daily RSI diverged on the high, pair fell below the 61.8% fib of 0.7277-0.6867

• Rising monthly RSI, pair's hold above 10- & 21-DMAs give bulls some comfort
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Sterling's recent climb past 1.36 appears set to continue, spurred by the U.S. Treasury's decision to increase its long-end Treasury buyback program announced on Wednesday.

This move weakened the U.S. dollar, propelling cable to a three-month high of 1.3661 on Thursday, even as long-end UST yields experienced a slight rebound. Despite the dollar's dip, underlying U.S. fiscal concerns are unlikely to subside without a reduction in Treasury issuance, a development closely tied to November's refunding announcement.

Near-term market sentiment is being shaped by policy expectations for both the Fed and the Bank of England. LSEG's IRPR indicates a potential 25 basis point Fed hike in 2026, with nearly 50% odds for a second in late 2027. The BoE is also anticipated to hike once in 2026, with slightly more aggressive projections for 2027. This alignment in rate expectations is likely fueling the unwinding of short sterling positions among IMM speculators, a trend further supported by recent Reuters polls suggesting a more dovish Fed outlook into 2026 than current futures data on LSEG's IRPR suggests. However, GBP/USD bulls might encounter headwinds from ongoing geopolitical tensions in the Middle East. Persistent instability, especially concerning oil flows through the Strait of Hormuz, could risk dislodging inflation expectations. If this scenario unfolds, the dollar could reassert its safe-haven status, buttressed by a prolonged period of high U.S. interest rates.

Currently, resistance for GBP/USD is observed near today's trend high of 1.3660, followed by the February 4 peak of 1.3733. Support is found at the 10-day moving average of 1.3534, with bulls maintaining control as long as the price stays above the 200-day moving average at 1.3423.
GBP Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

MUFG Research discusses the UST buybacks program.

The US Treasury unscheduled announcement yesterday that it would increase US Treasury bond buybacks resulted in the biggest daily drop for the US dollar since March when you exclude the two episodes of USD selling intervention in April/May and July," MUFG notes.

"We would  argue that Scott Bessent is not following his own advice. Following the joint intervention at the end of July Bessent stated that “you can give market signals with intervention, but it’s policy that turns it”. He added that FX intervention “would need to be followed by Japanese policies addressing the forces driving the yen lower...

Well, if Scott Bessent really believes that then the US Treasury could play a key role here by of course addressing the ever-expending fiscal deficit with fiscal consolidation.

We all know that’s not going to happen and hence the danger now following this announcement (and the FIMA report comment to Japan following intervention) is that it proves counter-productive and leads to reduced appetite for either holding US assets (UST bond sales) or reduced appetite for exposure to the US dollar (dollar selling) or both. Even if the Treasury buy-back plan does contain yields, the US dollar now remains more vulnerable to the downside on the fact that yields are potentially lower," MUFG adds.

• Cable has traded a 61 pip range since the London open; 1.3600-1.3661

• 1.3661 is the highest level since February (1.3658 was May high)

• BUZZ-Bessent's bond buying may lift GBP/USD to 1.40

• UK statistics office revises up 2023 and 2024 growth estimates

• UK July retail sales data due on Friday, before August flash PMIs

• Pound can bank on another 6-3 rate hold vote in September

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research discusses its latest EUR outlook and targets.

"Looking ahead, despite our constructive medium-term EUR bias, we hesitate to turn constructive just yet. One reason is developments in Iran and the recent surge in gas prices, with our commodities team seeing upside risks relative to current levels. A second reason is the lack of clarity on the Fed's reaction function - Jackson Hole is key. A third reason is lighter positioning," BofA notes.

"Meanwhile, disagreements have emerged within Germany's governing coalition over the proposed reforms, also ahead of the autumn state elections. As for FX hedging, low vol and restored correlations suggest no imminent changes.

As such, we await for clarity and would avoid chasing EUR higher right now. We still forecast EUR-USD at 1.12 by end-Q3, 1.15 by year-end, and 1.20 by end-27," BofA adds.

Goldman Sachs discusses the implications of the UST buybacks program on FX markets.

"The Treasury announced they will increase long end buybacks by at least $2bn per operation for the remainder of the refunding quarter. Duration may well rally given positioning in the steepener (and short-term reaction to the news). However, this should just act to cap the upside rather than cause material sustained move lower in yields," GS notes.

"We do however think this is more meaningful for the USD. They have shown that they are willing to be imaginative when it comes to supporting the backend, however this may come at the cost of a weaker USD. We can also see recent action to support the JPY point in that direction tool. A clear trade-off may start to emerge. Supporting bonds may come at the expense of letting the USD become the adjustment valve (prioritise yield control over FX control). This should be most bullish for Gold and then CHF in the fiat currency space. EUR$ is also interesting here given the break of the 200d MA (and corresponding break in DXY)," GS adds.

• Cable rose to 1.3661 during the London morning, on further USD selling

• 1.3661 is the highest level since February 16 (1.36615 was high that day)

• Dollar continues to suffer on bond buyback news from the U.S. Treasury

• BUZZ-Bessent's bond buying may lift GBP/USD to 1.40

• Cable was last at 1.40 in June 2021 (1.3867 was 52-month high in January)

• 1.3630 (Wednesday high) is now a support level, pre-1.3600 and 1.3571

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• Dollar struggles as Treasury moves to soothe bond jitters

• Broad USD weakness following Treasury news sent USD/JPY down from 159 handle to 158

• USD/JPY's big Wednesday setback, closed back below cloud that now spans 158.92-161.59

• Spot failed to sustain the recent break above 159.60 Fibo, a bearish signal

• It has seen a 158.03 to 158.72 range, on Thursday, according to EBS data

• USD/JPY and EUR/JPY usually struggles in August

Daily Chart


(Martin Miller is a Reuters market analyst. The views expressed are his own)

• EUR/USD rises to 1.1703 on August 20

• Highest level since May 14 when pair traded 1.1721

• Short squeeze has fuelled rise from 1.1353 on Jul 28

• Rise exceeds 1.1696 -78.6% May-June 1.1797-1.1325 drop

• Extension to May's 1.1797 peak now looking likely

• Many traders have been caught out by dollar's fall

•
EURUSD


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

August 20 (Reuters) - GBP/USD could rise to 1.40 for the first time in more than five years if the deterioration in sentiment towards the dollar deepens into the autumn. The catalyst for the deterioration was the U.S. Treasury's announcement on Wednesday that it would double the size of its U.S. long-bond buybacks. The unexpected news deflated UST yields and spurred selling of the USD – which lifted cable to a three-month high of 1.3630. A prospective cable move to 1.40 could be juiced by more squeezed GBP shorts: CFTC data showed the net GBP short position totalled a still hefty 56,221 contracts in the week ended August 11 (the net GBP short hit a nine-year high of 105,719 contracts in June).

If GBP/USD does rise to 1.40, it would arguably still be "cheap": 1.65 was its approximate average in the 10 years leading up to the Brexit referendum in June 2016.

Related:
GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• AUD/USD retreated to 0.7103 in Asia on soft Australian jobs data

• Employment unexpectedly fell in July; jobless rate 4.5% vs 4.4% forecast

• 0.7103 is low water-mark since Wednesday's jump to test 0.7129

• USD selling on U.S. Treasury news was catalyst for 0.7129 test

• 0.7129 was Monday's 10-week high (0.7067 was Wednesday low)

• U.S. Treasury's upsized buybacks may complicate Fed's monetary policy work

AUDUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• EUR/USD rises to 1.1684 on Thursday

• Limit for correction of May-June 1.1794-1.1325 drop is 1.1694

• A rise to May's 1.1794 peak likely on any move beyond 1.1694

• The rally is quite stretched toward peak 20-day Bollingers

• Short squeeze fuelled rise, likely few longs to bar bigger gains

•
EURUSD


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Brokerage Jefferies initiates coverage of Italian cash-for-gold trader Gens Aurea with a "buy" rating, seeing opportunity for consolidation in a highly fragmented market

• It sets an initial PT at €15 ($17.51), implying 56% upside from Wednesday's closing price

• Noting the high fragmentation of the European gold recycling market, the brokerage deems Gens Aurea well positioned to gain market share through superior scale, selective M&A and organic expansion

• "As gold prices rise, the Group passes part of the benefit to customers through more competitive pricing, supporting higher volumes, stronger store productivity and share gains," Jefferies says

• It adds the group offers a lower commodity risk compared to traditional gold miners, thanks to its hedging strategy limiting exposure to its core earnings and valuation from fluctuations in gold prices

• Jefferies is the first broker to initiate Gens Aurea since its Milan bourse debut in July, according to LSEG data

($1 = 0.8568 euros)

(Reporting by Mirko Miorelli)

• GBP/USD consolidates in Asia after closing 0.55% higher on Wednesday

• Boosted by Treasury's support measures aimed at capping long-dated yields

• Supported by lower U.S. yields and receding Fed rate-hike expectations

• Fed July meeting minutes show 'many' officials saw need for a rate hike

• But taken in stride as benign July inflation and jobs data preclude Sep hike

• UK July inflation rises as expected, leaves BoE rate outlook unchanged

• Resistance 1.3650-60, 1.3690-1.3700, support 1.3560-70, 1.3525-30

• Wednesday range 1.3525-1.3630, Asia 1.3597-1.3614
GBP:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

Bank of America Global Research discusses UST outlook.

"US Treasuries remain historically cheap relative to domestic macro fundamentals, with our valuation frameworks continuing to point to attractive medium-term entry levels, and scope for a dip-buying stance," BofA notes.

"However, valuation arguments alone are not sufficient to take stance on duration. The utility of Treasuries as portfolio diversifiers has deteriorated as stock-bond correlations remain near their highest level since the late 1990s. The current valuation discount is likely to reflect this reduced utility, as investors are no longer willing to pay the same premium for duration's traditional hedging properties," BofA adds.

• AUD/USD -0.3% Thur after AU jobs data printed at the low end of forecasts

• AU Jul employment: -15.8k jobs (poll +15k), 4.5% unemployment (poll 4.4%)

• DXY trading near 12-week lows as U.S. Treasury flags increased bond buybacks

• Stalled U.S.-Iran peace negotiations fuels Strait of Hormuz confusion

• RBA Aug monetary policy meeting minutes to be released Tue

• Range Asia 0.71155-28 support 0.6920 0.6866, resistance 0.7130 0.7200
DXY Daily 55-DMA


AUD daily 21/100/200-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• Across the board USD weakness sends USD/JPY back down into 158 handle

• From 159.64, USD/JPY to 158.04 yesterday, Asia so far today 158.03-30 EBS

• Through base of 158.92 daily Ichimoku cloud base, 200-DMA at 158.30

• Maybe in lower range capped @158.60, 158.61 retracement high post fall

• Japanese exporter sales to continue on rallies, absorb importer demand?

• News US Treasury to double long-bond buy-backs impact large, US yields off

• Japan fiscal concerns allayed to extent too as global bonds rallied

• Narrowing trend in JGB-US Treasury rate differentials could thus continue

• As of the New York close, differential in 2s @246.7 bps, in 10s @178 bps

• Fed minutes showed hawkish bias but recent data weaker, view no Sept hike

• Wall Street up as result, Nikkei likely up too, foreign buys/ccy hedges?

• Option expiries today include 158.00-10 $1.9 bln, 159.00 $985 mln

• Related comments , , ,

• Also , on Tsy buy-backs , on US debt

• US markets , , ,

• On Fed minutes , on global bonds

• On Japan's fiscal concerns , for more click on [FXBUZ]

USD/JPY:


JGB-US Treasury 2-year interest rate differential:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• USD/THB opens lower, broad USD fall and rally in gold prices weigh

• USD and UST yields tank after Treasury doubles 10/20-yr buybacks

• 10yr UST yield -6bps to 4.64%, 30yr last at 5.18%

• DXY last at 98.82, ranged 98.76-99.69 overnight

• USD/THB traded 32.84-33.08 range in NY, closed at 32.91

• Supports at 3280, 32.60; resistance at 33.0, 33.20

• Oil prices up on escalating tensions in the ME, Brent last $91.85/bbl

• Spot gold rose 4.05% to $4,508.64 an ounce overnight, last at $4510/oz

• Related
THB=

(Catherine Tan is a Reuters market analyst. The views expressed are her own.)

• NZD/USD +1.2% from Wed 0.58605 low as broad USD index hits 12-week low

• UST yields drop on news U.S. Treasury will increase curve control measures

• NZD break of 0.5925-30 resistance zone opens topside potential toward 0.5995

• No progress on U.S.-Iran peace deal leaves Strait of Hormuz in limbo

• Gold +4.3% while Brent crude remains elevated at $91.57 a barrel

• NZ Jul balance of trade update, and Aug S&P manufacturing PMI due Fri

• Range NZ 0.59325-38, support 0.5831 0.5762, resistance 0.5995 0.6090-95
NZD Daily 55-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

Goldman Sachs Research constructed a series of FX factors (Carry, Equity Risk, National Debt, NIIP, Energy and Metals Commodities, and Mean Reversion) by applying time-varying weights to 26 currencies, including the US Dollar.

"We show that this is the case for a Carry/Risk-Off blend during periods of moderate equity drawdowns, and for a Carry/NIIP blend to benefit from capital retrenchment in periods of correlation breakdowns in US assets," GS notes.

"We also find that blending Carry with Mean Reversion can help to improve total vol-adjusted returns," GS adds.

• AUD/USD +0.8% from Wed 0.7067 low after UST yields sank on bond buyback news

• U.S. Treasury to double size of long-date buybacks to increase liquidity

• AU Jul employment data 0130 GMT, poll consensus +15k jobs, 4.4% unemployment

• AUD near upper hourly Bollinger band, upswing may stall ahead jobs data

• Strait of Hormuz uncertainty persists with no signs of peace progress

• Gold +4.3% while Brent crude remains elevated at $91.57 a barrel

• RBA Aug monetary policy meeting minutes to be released Tue

• Overnight range 0.7069-0.7129 support 0.6920, resistance 0.7130 0.7200
AUD Hourly Bollinger Study & DXY daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• NY opened near 0.7075 after 0.7067 traded overnight, rally took hold early

• US Treasury announcement sent yields , down & rallied risk assets

• Gold, silver, copper & equities put in solid gains & USD/CNH fell to 6.7279

• AUD/USD spiked up and pierced the 61.8% Fib of 0.7277-0.6867, traded 0.7129

• USD & yields firmed in NY's afternoon, AUD/USD neared 0.7115 into the Fed minutes

• AUD/USD rallied slightly after the Fed minutes, traded up +0.45% late in the day

• Techs lean bullish; RSIs are rising, ongoing consolidation, hold above 10-DMA are bullish
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• NY opened near 1.1605 after 1.1570 traded overnight, rally extended early NY

• USD, US yields fell sharply after US Treasury liquidity support news

• EUR/USD spiked upward as risk-on sentiment dominated early trading

• Gold, silver, stock rallied sharply while USD/CNH fell below 6.7280

• EUR/USD rallied above the 200-DMA, hit a 2-1/2-month high of 1.1677

• USD & yields firmed in NY's afternoon, EUR/USD neared 1.1660 into the Fed minutes

• The USD softened a bit after the Fed minutes, EUR/USD neared 1.1670, was up +0.79% late

• Techs lean bullish; RSIs indicate bull momentum, pair above 200-DMA & June monthly high
eurusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)