• $IDX +1.23% in the Oct 2-8 IMM period, paring the spec USD short further

• The G10 net spec short fell $4.34bn less-dovish Fed policy expectations

• $IDX moved higher still after period close likely stirred further sales

• EUR$ -0.8%; specs -16.2k contracts now +39.1k on diverging Fed-ECB rate view

• $JPY +3.2%; specs -20.2k contracts now +36.5k; BoJ skittish about rate hikes

• GBP$ -1.39%; spec -630 contracts now +93.1k; trader eye dovish BoE lean

• AUD$ -1.97%; specs +18.9k contracts now +33.4k; less dovish RBA supports AUD

• $CAD +1.15%; specs -19.1k contract now -89.2k Fed-BoC divergence stirs CAD selling

The dollar index eased Friday amid profit-taking after a nine-day advance and lower short-term Treasury yields following a batch of soft U.S. data.

U.S.
producer prices were unchanged in September on a monthly basis and the University of Michigan consumer sentiment index for October unexpectedly fell.

Bank shares surged after JPMorgan Chase and Wells Fargo beat expectations in the third quarter.

Canada's economy added an above-forecast 46,700 jobs in September and the unemployment rate unexpectedly decreased.

Canadian firms are still seeing weak demand and slow sales growth but conditions improved marginally in the third quarter, according to a Bank of Canada survey released on Friday.

Britain's economy grew a below forecast 0.2% in August after two consecutive months of stagnation.

Treasury 2-year yields fell 6 basis points as the yield curve steepened.
The 2s-10s curve was up about 3 basis points to +13.6bp.

The S&P 500 rose 0.64% and reached a new record as bank shares surged

Oil was down 0.49% but was set for a second weekly gain amid supply disruption concerns.

Gold rose 1.08% amid Fed rate cut hopes

Copper advanced 1.44% as traders await further details on the Chinese stimulus package Saturday.

Heading toward the close: EUR/USD +0.06%, USD/JPY +0.32%, GBP/USD +0.10%, AUD/USD +0.27%, DXY -0.13%, EUR/JPY +0.42%, GBP/JPY +0.46%, AUD/JPY +0.62%.

For more click on FXBUZ

• NY opened near 0.6735 then hit the session low of 0.67255, a rally ensued

• US yields US2YT=RR, US$ softened; USD/CNH fell back below 7.0700

• Commodities HGv1, XAU= & equities ESv1 gained on upbeat risk

• AUD/JPY rallied above 100.75 to help AUD/USD's climb off the lows

• 0.6759 hit in NY's afternoon, AUD/USD traded up +0.20% late in the day

• A rally followed Thursday's bull hammer and daily RSI is rising

• Monthly RSI is falling however and the pair remains below the 10- & 21-DMAs

• For more click on FXBUZ

Synopsis:

ING highlights the potential for good news from China to provide support for the EUR/USD pair, which has stabilized within the 1.09-1.10 range but faces several downside risks.

Key Points:

1. Current Market Dynamics:
   EUR/USD remains in a fragile position, fluctuating between 1.09 and 1.10. The USD:EUR two-year swap rate gap of 130 basis points suggests potential movement toward sub-1.09 levels, exacerbated by tensions in the Middle East, which negatively impact the pro-cyclical, oil-sensitive EUR.

2. Importance of Chinese Developments:
   Positive news from Beijing could significantly influence the tactical outlook for EUR/USD, as the euro historically responds favorably to optimistic developments in China. Such news could help establish a support level around 1.090 early next week.

3. Limited Eurozone Inputs:
   The eurozone economic calendar is currently sparse, providing little direction ahead of the upcoming ECB meeting. The latest ECB minutes offered limited insights, particularly in light of unexpected inflation data. While there are arguments against a rate cut, market consensus strongly favors a 25 basis point reduction.

Conclusion:

As the market awaits developments from China and the upcoming ECB meeting, positive news from Beijing could act as a stabilizing force for EUR/USD, helping to build a floor at 1.090. However, the prevailing economic uncertainties and geopolitical tensions may continue to pose risks to the euro in the short term.

• EUR/USD hit a 2-month low Thursday, then bounced & ended the day near flat

• A daily doji candle formed & the pair sat above the daily cloud base

• Today a rally followed Thursday's doji and daily RSI turned upward

• Thursday's daily high and the 5-DMA are impediments at the moment

• A break & close above both will reinforce the current bullish daily signs

• EUR/USD shorts may get squeezed and the 1.1000/20 zone may get tested

• A rally above that zone may bring September's monthly high into focus

• For more click on FXBUZ

Synopsis:

Goldman Sachs suggests that the EUR should now be considered the funding currency of choice, particularly in comparison to the CHF and JPY, given current market conditions and expectations for currency performance.

Key Points:

• The firm utilizes its market regimes framework to analyze FX performance based on yield direction and rate volatility, indicating that the current environment favors the EUR.
• Their baseline forecasts predict higher equities, stable yields, and reduced rate volatility, which could lead to renewed weakness in the Dollar and cyclical outperformance for both G10 and emerging market currencies.
• Despite the potential for near-term Dollar strength—especially if US equities reflect a stronger domestic growth outlook compared to European counterparts—the overall sentiment leans towards a longer-term weakening of the Dollar.
• In light of these conditions, Goldman Sachs advocates for the EUR as the preferred funding currency, favoring it over the traditionally safer CHF and JPY.

Conclusion:

As market dynamics shift and uncertainties loom, Goldman Sachs identifies the EUR as a more attractive funding option, potentially enhancing its appeal against the backdrop of stable yields and positive equity performance. This perspective underscores the changing landscape in currency markets amid evolving economic conditions.

Sterling traded near the lower end of its tight 1.3042-1.3082 Friday range in early NorAm as traders shrugged off mixed August UK GDP and output data, but the risks could rise as markets prepare for upcoming British CPI data, which may better inform markets on the path of rates and GBP/USD.

Today's sideways data gave no edge to hawks or doves among BoE watchers, and STIR futures hold to a near-80% chance for a UK rate cut in early November and -35bp by the Dec.
19 MPC meeting, relatively unchanged from before the data.

Traders now look toward UK CPI data on Oct.
16 for BoE policy path clues, though the market seems to be leaning on a more-dovish policy path going forward given recent sterling declines.

Governor Andrew Bailey recently said the BoE could become more aggressive in its approach to lowering rates depending on inflation news.
Should UK CPI slip, as per Reuters forecasts, rate cut expectations are likely to rise, putting further downward pressure on GBP/USD.

Currently, GBP/USD has found support near 1.30, by the Sept.
11 low.
A close below 1.30 puts the daily cloud base at 1.2941 and the 200-DMA at 1.2789 in sharper focus.

For more click on FXBUZ

Synopsis:

BofA’s latest FX and Rates Sentiment Survey reveals that while the USD faces potential headwinds, particularly from rates convergence, the upcoming US elections could significantly impact the currency's outlook.

Key Points:

• Rates convergence remains the largest perceived risk for the USD, suggesting that changes in interest rate differentials could weaken the dollar.
• The impending US elections are coming into sharper focus, with the possibility of a Democrat administration being viewed as a bearish risk for the USD by some market participants.
• Conversely, the notion of "US exceptionalism" and a potential repricing of Fed policies higher are considered significant headwinds for the USD.
• Some analysts argue that a Republican administration could present a bullish risk for the USD, potentially strengthening the currency if perceived policies favoring economic growth are implemented.

Conclusion:

As the US November elections approach, the outlook for the USD remains uncertain, influenced by both internal political dynamics and external economic factors. Market sentiment is split, with rates convergence and election outcomes both playing critical roles in shaping the dollar's trajectory.

Synopsis:

CIBC highlights the mixed signals from Canada’s September jobs report, indicating that while job growth was strong, the details suggest caution regarding a 50bp rate cut in October.

Key Points:

• Canada added 47K jobs in September, exceeding expectations of 27K; however, this strong headline figure conceals weaker underlying details.
• Total hours worked decreased by 0.4%, and the employment rate fell slightly, suggesting some softness in the labor market.
• The unemployment rate improved to 6.5% (against expectations of 6.7%), but this was influenced by a further decline in the participation rate.
• Wage growth for permanent employees slowed to 4.5% year-over-year from 4.9%, indicating cooling wage pressures.
• The employment mix showed an increase of 112K full-time positions but a loss of 65K part-time jobs, adding complexity to the employment narrative.

Conclusion:

Despite a positive headline job creation figure, the overall mixed nature of the report makes a 50bp cut from the Bank of Canada less certain for October. Upcoming economic indicators, including the Business Outlook Survey and next week’s CPI report, will be critical in shaping future monetary policy decisions.

• 1-week EUR/USD option implied volatility jumped from 5.5 to 6.5 Wed-Thurs

• That reflected its inclusion of Thurs ECB and related FX volatility risk

• However, limited realised spot volatility/expectations saw it revert to 5.85

• Huge FX option strike expiries limit spot volatility Friday and next week

• U.S. election risk underpins 1-month implied volatility in the low 7's

• Option risk reversals show a market bracing for a bigger USD recovery

For more click on FXBUZ

It may be prudent to hedge for a higher EUR/USD range with a rise from the 1.04-1.11 area that has seen the bulk of trading volumes since the beginning of 2023.

While speculators may continue to gamble on a move higher, as has been their preference since October 2022, those who are seeking to reduce the risk posed by currency moves might focus on the pair trading in higher ranges.

The emergence of important lows above 1.0600 is one reason to pick a higher base with the lows at 1.0601 in April and 1.0666 in June, a step up from key lows last year which unfolded closer to 1.04-1.05.

This year's lows were shaped by the presence of the 100-WMA which has since risen to 1.0820.
EUR/USD hasn't closed below the 100-WMA since October 2023, and it could help to define a substantially higher base following the rise to this year's high at 1.1214 in September.

This year's high is slightly below last year's 1.1276 peak, while 1.1221 is the 61.8% retracement of losses that resulted from the U.S. tightening cycle, so a move beyond 1.13 may well result in a rise toward 1.1680-1.1750.

It is worth considering the development of a 1.08-1.12 range where the base is shaped by the 100-WMA, while the area where most trading volumes occurs rises to 1.06-1.13 from 1.04-11.

For more click on FXBUZ

• AUD/USD failed under the 0.6716 Fibo, setting up a possible bear trap

• 0.6716 Fibo is a 38.2% retrace of the 0.6349 to 0.6943 (Aug to Sept) rise

• A bear trap is set when a market breaks below a tech level but then reverses

• There is a good chance of a bigger recovery to the kijun line

• Daily kijun line is the midpoint of the last twenty-six days, now at 0.6783

• AUD/USD Trader TGM2347

• Doji candles are hinting at bearish indecision and rebound risk

• Counter to this a Thurs close inside the daily cloud

• Daily momentum readings are nearing over sold levels

• A break back above the daily cloud top, 1.3073, could trigger a squeeze

• Signals are mixed but corrective gains the Friday risk

• We are side lined for now waiting for stronger signals

• GBP/USD trader TGM2338

  For more click on FXBUZ

• Sales of options are telling for the near term EUR/USD outlook

• Implied volatility gauges actual volatility expectations to set the premium

• Implied volatility under pressure, especially short dated expiries

• Even 1-month expiry is suffering amid the current lack of actual volatility

• However, 1-month will remain underpinned since including U.S. election

• There's little to excite EUR/USD ahead of NFP, election and Fed in early Nov

• Option risk reversals show EUR/USD downside is more vulnerable nL1N3LM080

• Huge strike expiries help to pin EUR/USD to 1.09's again Friday nL1N3LN05A

For more click on FXBUZ

• Cable eases to 1.3045 intra-day low after UK August GDP matches 0.2% f/c

• 1.3048 was low shortly before the UK data release (1.3065 was Asia high)

• UK August GDP match underpins expectation that BoE will cut rates on Nov 7

• Next Fed rate decision on Nov 7 too (post-BoE): Bostic open to a skip

• 1.3011-1.3094 was Thursday's GBP/USD range (1.3011 = one-month low)

• UK budget Oct 30: Reeves is considering raising CGT to 39%, Guardian says

• Tight doji style candles continue to ask questions of the bear run

• We are long from 0.8364 for 0.8440 with a stop at 0.8320

• Potential turn higher supported by 10DMA, 0.8364, former trend res., 0.8352

• Fourteen day momentum has flips strongly positive: daily RSI is flat lining

• A break above the daily kijun line at 0.8387 needed to bolster the reversal

• EUR/GBP Trader TGM2343

  For more click on FXBUZ

• Steady in a tight 1.0930-1.0940 Asian range with the U.S. dollar steady

• Markets were quiet ahead of the weekend China policy detail and CPI data

• The UK data dump may move EUR/GBP, US PPI, and Fed speakers EUR/USD

• Charts - mixed daily momentum studies, 21-day Bollinger bands expand

• 5, 10 & 21-day moving averages track lower, a negative trending setup

• Thursday's 1.0955 high, then this week's 1.0997 top are initial resistance

• 1.0900 New York low then 1.0876 0.618% of the Jun/Sep rise are first support

• 1.0900 1.404BLN, 1.0925/35 2.386BLN, 1.1000 3.206BLN close Oct 11th strikes

For more click on FXBUZ

Synopsis:

ING observes that EUR/USD may be poised for a decline toward the 1.0800 level, influenced by market pricing and geopolitical tensions.

Key Points:

• The market is currently fully pricing in 25bp rate cuts from the ECB for both October and December, leading to widened EUR/USD swap differentials.
• Despite the prevailing conditions, EUR/USD remains weak, indicating potential for a drop to the 1.0800 area.
• The recent adjustments in US short-dated yields may not be the primary catalyst for this movement, as they have already seen significant changes.
• A more likely trigger for a breakdown would be an increase in energy prices, particularly given the geopolitical tensions in the Middle East, which could impose a greater risk premium on the euro.

Conclusion:

The outlook for EUR/USD appears bearish, with technical indicators suggesting a potential move lower. Market participants should remain vigilant to developments in energy prices and geopolitical events that could significantly impact the euro's performance.

• Off 0.05% at the base of a tight 1.3055-1.3065 range and moderate flow

• GDP leads the monthly UK data dump, with construction, IP, and services

• Data will provide a snapshot of the UK economy for the BoE rate decision

• Core PPI and UoM consumer sentiment lead Friday's U.S. dollar data risk

• Charts, ten days of lower daily highs leave a negative technical setup

• Daily momentum studies head lower as 21-day Bollinger bands expand

• 5 & 10 DMA slide - this week's 1.3133 high is the first resistance

• 1.3002 Sept low and 1.2984 lower 21-day Bolli band likely resilient support

• For more click on FXBUZ

• +0.05% in a tight 0.6738/0.6747 range in a low-key morning in Asia so far

• S&P/ASX 200 is off 0.1%, Nikkei +0.57% and AsiaxJP stocks +0.4%, Brent -0.5%

• Asia cautious on China's weekend fiscal policy details and inflation data

• A busy night for data with UK GDP, US PPI, and a slew of Fed speakers

• Charts; daily momentum studies ease, with 5 and 10-day moving averages

• 21-day Bollinger bands gently contract - overall a modest downside bias

• 0.6716, 0.382% of the Aug-Sep rise and 55 DMA is proving resilient support

• Major resistance at 0.6802/10 - high this week, 10 & 21-day moving averages

  For more click on FXBUZ

• Steady after closing down 0.1% with the U.S. dollar off 0.05%

• Think tank says risk appetite can arrest Britain's downward spiral

• UK's GDP leads the monthly data dump, with construction, IP, and services

• Data will provide a snapshot of the UK economy for the BoE rate decision

• Charts, ten days of lower daily highs leave a negative technical setup

• Daily momentum studies head lower, with expanding 21-day Bollinger bands

• 5 & 10 DMAs slide - net negative - this week's 1.3133 high first resistance

• 1.3002 Sept low and 1.2985 lower 21-day Bolli band likely resilient support

For more click on FXBUZ

• Off 0.05% after closing down 0.05% on Thursday with the USD -0.05%

• The new French government presented a 2025 belt-tightening budget

• With no tier on Euro zone data today the USD will likely lead EUR/USD

• Charts - negative daily momentum studies, 21-day Bollinger bands expand

• 5, 10 & 21-day moving averages track south, a negative trending setup

• Thursday's 1.0955 high, then this week's 1.0997 top are initial resistance

• 1.0900 New York low then 1.0876 0.618% of the Jun/Sep rise are first support

• 1.0900 1.404BLN, 1.0925/35 2.386BLN, 1.1000 3.206BLN close Oct 11th strikes

  For more click on FXBUZ

• Off 0.05% after closing up 0.35%, supported by the stronger commodity prices

• With no tier-one Australian data or RBA speeches, risk and the USD lead AUD

• Asia may be cautious ahead of China's weekend fiscal policy details, CPI

• Charts; daily momentum studies ease, with 5 and 10-day moving averages

• 21-day Bollinger bands gently contract - overall a modest downside bias

• 0.6716, 0.382% of the Aug-Sep rise and 55 DMA is proving resilient support

• Major resistance at 0.6802/10 - high this week, 10 & 21-day moving averages

• A close outside 0.6700 or 0.6810 tonight would likely extend next week

For more click on FXBUZ

Synopsis:

Nordea suggests that the upcoming ECB meeting may trigger a slightly hawkish initial reaction from the market, as current pricing anticipates 25bp rate cuts in the near future.

Key Points:

• Financial markets have largely priced in 25bp cuts at the next two ECB meetings, indicating that a cut in October is already anticipated.
• The ECB is likely to avoid indicating a willingness to implement larger cuts at this stage, potentially leading to a more cautious approach.
• There is a possibility that more hawkish members of the Governing Council may seek a commitment to a more open-minded statement about future policy adjustments in exchange for their support for the rate cut.
• Recent data releases, such as the September PMIs, show significant upward revisions, challenging the perception of a uniformly negative economic outlook, particularly in services inflation.

Conclusion:

Overall, while the market expects cuts from the ECB, the possibility of a hawkish tone could create volatility, particularly if the central bank hints at a more flexible future policy approach.