• USD net spec USD short pared by $3.2bn in the Sep 4-10 period; $IDX -0.05%

• USD has dipped since the period close as odds 0f -50bp Fed Sept 18 rise

• EUR$ -0.21%; specs -18,585 contracts now +81,433; mkt wary of ECB 25bp cut

• $JPY -2.02% in period; specs +14,654 contracts now +55,770

• Fed-BoJ rate convergence continues to apply downward pressure on $JPY

• GBP$ -0.25%, specs - 17,790 contracts, now +90,288; BoE on slower cut path

• $CAD +0.36%, specs -409 contracts now -68,953; AUD$ -0.89% in period; specs -6,178 contracts

The dollar fell Friday as odds of a 50 basis point Fed rate cut Wednesday were lifted following various media reports on the policy outlook.

Current market pricing stands at about 45% for such a cut, rising from under 20% earlier this week.

Risk- and yield-sensitive currencies outperformed on the session as lower Treasury yields fueled a rally in shares.

Inflation fears eased after a report U.S. import prices fell a more-than-expected 0.3% in August with export prices dropping 0.7% on the month.

The University of Michigan sentiment index for September improved more than expected as one-year inflation expectations eased.

European Central Bank President Lagarde said the central bank remains an independent institution not subject to any political pressure, rebuffing Italian calls for bigger interest rate cuts.

ECB policy maker Robert Holzmann said that rates could fall to 2.5% by mid-2025, the FT reported.

The Biden administration locked in tariff hikes on Chinese imports Friday.

Treasury yields fell across tenors with the policy-sensitive 2-year dropping about 3 basis points as the curve steepened.
The 2s-10s curve moved to +3.7bp.

The S&P 500 rose 0.68%.

WTI fell 0.43%, reversing an earlier gain as weekly data showed the U.S. adding drillers while Hurricane Francine’s impact abated.

Copper advanced 0.72% amid a broad rally in metals as the greenback fell.

Gold rose 0.95%, setting a fresh record near $2586 per ounce.

Heading toward the close: EUR/USD +0.06%, USD/JPY -0.60%, GBP/USD -0.03%, AUD/USD -0.21%, DXY -0.27%, EUR/JPY -0.55%, GBP/JPY -0.61%, AUD/JPY -1.01%.

For more click on FXBUZ

• NY opened near 1.1090 then dipped below 1.1080, buyers emerged

• Tighter DE-US spreads US2DE2=RR, US$ drop lifted EUR/USD to 1.1102 on EBS

• Pair slide below 1.1080 again despite equity, gold gains & USD/CNH drop

• EUR/JPY fall to 155.65 helped push EUR/USD lower, pair was up +0.07% late

• Techs lean bullish; daily, monthly RSIs rising, pair traded above the 5-DMA

• Bull flag pattern on daily chart reinforces the bullish signals

• Fed rate decision & Powell presser will be the main events next week

• US August retail sales is a risk ahead of the Fed meeting

• For more click on FXBUZ

Synopsis:

Barclays anticipates EUR/USD to rise towards 1.12 by year-end, driven by recent shifts in Fed policy expectations and political developments. However, they foresee a decline below 1.10 in 2025 due to a weakening macroeconomic backdrop in Europe and China.

Key Points:

1. Short-Term Outlook: The EUR/USD exchange rate is expected to approach 1.12 by the end of the year, buoyed by the Fed's changing easing cycle and President Biden's withdrawal from the 2024 election.
2. ECB and Fed Dynamics: A gradual ECB cutting cycle and ongoing fluctuations in Fed pricing could contribute to additional near-term gains for EUR/USD.
3. Long-Term Perspective: Barclays predicts that the weaker macroeconomic conditions in core Europe and China will eventually dominate, leading to a decline in EUR/USD to below 1.10 over the next few quarters.

Conclusion:

While Barclays forecasts a short-term rally in EUR/USD towards 1.12 due to recent developments, they project a decline below 1.10 in 2025 as the macroeconomic challenges in Europe and China become more pronounced.

• EU/UK rate differentials have been tightening of late

• Suggests a break of 0.84 in EUR/GBP is unlikely in the short-run

• ECB officials downplay the odds of an Oct cut 0#ECBWATCH

• A large deterioration in growth data would be needed to put Oct on the table

• Eyes turn to dual UK risks with CPI/BoE due Sep 18-19

• Given Sept meeting is likely to tee up a Nov cut

• Therefore, CPI may matter more for EUR/GBP direction

• With the BoE among the more hawkishly priced, risks lean to faster cuts

• Though, EUR/GBP remains largely a range trade between 0.84-0.86

For more click on FXBUZ

Synopsis:

BofA’s recent FX and Rates Sentiment Survey indicates growing concern about crowded rate long positions, surpassing long equities for the first time. Despite a significant sell-off in USD FX, evidence of crowded USD shorts remains minimal.

Key Points:

1. Rate Longs Perception: The global rates rally has intensified perceptions that long rate positions are the most crowded trade, now exceeding long equities.
2. Positioning Trends: While global duration longs are at historically high levels, they remain unchanged, suggesting an initial concentration in the front-end of the curve.
3. USD Shorts Concern: Despite a sharp decline in USD FX, there is limited evidence of crowded USD shorts. Current positioning is slightly bearish but remains close to neutral, consistent with BofA’s FX flow data.

Conclusion:

BofA’s survey highlights a significant shift in sentiment, with concerns about crowded rate long positions rising. In contrast, despite a USD sell-off, the positioning in USD shorts appears balanced and close to neutral.

EUR/USD rallied above the 21-DMA then struck a 5-session high Friday, but investors are waiting for the Fed to see if bullish influences from yield spreads and technicals are validated.

U.S.
short-term rates markets have priced in a higher probability the Fed will cut 50bps next after three former Fed officials a indicated Click here for the Fed to begin its cutting cycle with 50bps.

German-U.S.
2-year yield spreads US2DE2=RR traded their tightest since May of 2023 into the weekend.

Terminal rate differentials for the Fed SRAM26 and the ECB FEIH6 also tightened towards 87bps.

Tighter spreads helped underpin EUR/USD which helped keep bullish technical signals in place.

Rising daily and monthly RSIs imply upward momentum is in place and EUR/USD's hold above the 5- and 21-DMAs add to bullish signals.

A bull flag continuation pattern is in place on daily charts.
A break of the flag's top indicates completion of the pattern and suggests EUR/USD could rally above 1.1500.

The Fed meeting next week is the key risk for investors.
A rate decision will be made and the latest Summary of Economic Projections will be released.

A surprise 50bps cut and lowered rate forecasts could sink the U.S. rate complex and the dollar, potentially fueling a large EUR/USD rally.

For more click on FXBUZ

Synopsis:

Credit Agricole expects the Federal Open Market Committee (FOMC) to implement a 25bp rate cut next week, with potential for a 50bp cut remaining a notable risk. The USD is likely to rebound following the rate decision, influenced by the Fed’s forward guidance and updated projections.

Key Points:

1. Rate Cut Expectations: Credit Agricole anticipates a 25bp rate cut from the FOMC, though acknowledges the risk of a larger 50bp cut. The focus will be on Fed Chair Jerome Powell’s comments, the updated dot plot, and staff forecasts.
2. Forward Guidance: Powell is expected to emphasize a data-dependent approach and maintain an outlook for a soft landing in the U.S. economy. The Fed’s guidance is anticipated to indicate a more front-loaded but not overly aggressive easing cycle for 2024 and 2025.
3. Impact on USD: If the Fed’s rate cut does not exceed the already dovish market expectations, it could signal a more moderate easing cycle. As a result, the USD is likely to recover, taking cues from U.S. rates and yields.
4. Market Reactions: More aggressive cuts might be viewed as inconsistent with a soft landing scenario and could even signal recession concerns, potentially impacting market sentiment.

Conclusion:

Credit Agricole predicts a 25bp rate cut from the FOMC next week, with the possibility of a 50bp cut as a risk. The Fed’s forward guidance is expected to support a gradual easing cycle, leading to a rebound in the USD as the market adjusts to these expectations. The USD’s recovery will likely be influenced by the Fed’s approach to future rate cuts and economic outloo

Synopsis:

ANZ expects the USD to rebound next week, particularly against low-yielding currencies, as market expectations for aggressive Fed rate cuts may be disappointed. The recommended trade is long USD/CHF, leveraging anticipated outcomes from the upcoming FOMC meeting and the SNB's likely dovish stance.

Key Points:

1. FOMC Rate Cut Expectation: ANZ anticipates a 25bp rate cut from the Federal Reserve on September 19, but not the 50bp or 100bp cuts priced into the market for the end of 2024. Historical easing cycles suggest that a 50bp cut is unlikely given the current economic conditions.
2. Economic Backdrop: The U.S. economy, while showing signs of softening labor market conditions, does not reflect a severe downturn. Consumer spending remains resilient, and stronger retail sales could support the USD by alleviating overly aggressive market expectations.
3. USD Rebound Potential: With the market likely to adjust its rate cut expectations, the USD is poised for a rebound, especially against low-yielding currencies like the EUR, CHF, and JPY. The upcoming Fed update and dot plot will be crucial, particularly if fewer rate cuts are projected for 2025.
4. Long USD/CHF Strategy: Given that the Swiss National Bank (SNB) is expected to take a dovish stance to counter CHF strength, long USD/CHF is seen as a particularly attractive trade.

Conclusion:

ANZ forecasts a USD rebound next week, driven by a more modest Fed rate cut than currently priced in and a dovish SNB meeting later in September. Traders are advised to consider long USD/CHF positions to capitalize on these anticipated shifts, while the USD may experience varying impacts across different currency pairs based on their sensitivity to risk and yield.

• Dollar hits nine-month low versus yen as Fed debate reignites nL1N3KV08C

• There are WSJ, FT reports that a 50 bp cut is still an option nL1N3KV08C

• USD/JPY has dropped from 141.88 to 140.36, on Friday, EBS data shows

• Spot has broken below 140.49 Fibo, a 61.8% of the (127.22-161.96) rise

• USD/JPY chart points to a likely break below 140 nL1N3KV06G

• 140 is where option barriers reside, with large stops likely below

• EUR/JPY and USD/JPY currency pairs continue to trade in tandem

• Broadly softer dollar after WSJ/FT articles discussing a Fed 50pt cut

• Latest speculation in the Fed outlook brings a shift in rate expectations

• EUR/USD set for back to back daily gains with an eye on 1.1155, Sept. 6 high

• Early Monday action just nudges the EUR above 1.1100 but offers emerge

• Not a major rejection at the figure and an early NY rally above the risk

• Option expiries close to mkt at 1.1095-00-1.1120-25, E500mln and ER1.8bln

• Spot below 1.1000 to negate current bull move

  For more click on FXBUZ

• EUR/GBP struggling for direction but is maintaining a very shallow bull bias. We are long for a push to 0.8540 and have a tight 0.8425 stop. A move above the 0.8462 Sept. 11 high could trigger more of a squeeze. Fourteen day momentum is poised to flip positive and RSI is rising. Move above 0.8462 could open up a rally to 0.8486, 38.2% Fibo off 0.8624-0.8401.

• EUR/GBP Trader TGM2343

  For more click on FXBUZ

• AUD/USD rose to one-week high of 0.6733 in Asia; 0.6714 is subsequent low

• Ascent to 0.6733 spurred by higher risk of 50 bps Fed rate cut next week

• Higher risk of half-point Fed cut due to WSJ, FT reports and Dudley view

• Markets currently see 43% chance of 50 bps cut on Sept 18 FEDWATCH

• Chance of 50 bps cut next week was only 13% after US CPI data Wednesday

• 0.6622 was AUD/USD four-week low Wednesday. 0.6700 is now a support point

• EUR/USD has risen to break the 1.1078 Fibo level on Friday

• 1.1078 Fibo is a 38.2% retrace of the 1.1201-1.1002 (Aug-Sep) EBS drop

• A daily close above the 1.1078 Fibo would add to the upside bias

• Those that are bullish should be mindful that 14-day momentum is negative

• A failure to close above 1.1078 Fibo would be a sign the recovery is over

• EUR/USD Trader TGM2334. Previous update nL1N3KT16K

• Cable up to 1.3150 as higher risk of 50 bps Fed rate cut next week hurts USD

• 1.3150 is one-week high (1.3003 was 3-week low Wednesday after US CPI data)

• Markets now see 43% chance of 50 bps cut on Sept 18 vs 15% chance Thursday

• FEDWATCH. Dovish shift spurred by WSJ, FT reports and view from Dudley

• 1.3150 approximates to 61.8% Fibo of 1.3238 (Sept 6 high) to 1.3003

• BoE set to keep rates unchanged next week; focus on QT programme decision

• M-term chart is bearish, as spot continues to trade under the 144.59 Fibo

• 144.59 Fibo, is a 50% retrace of the 127.22-161.96 (2023-2024) EBS rise

• Expect a break under the 140.49 Fibo, a 61.8% of the same 2023-2024 rise

• 14-week momentum remains negative, reinforcing the underlying bearish bias

• USD/JPY trader TGM2336. Previous update nL1N3KT16P

• AUD/USD bid in Asia but fails to build on gains despite broadly weaker USD

• Downside limited on heightened speculation of a large Fed rate cut next week

• Reports from FT and WSJ suggest size of Fed cut Wed will be a close call

• Probability of 50 bps cut rises to 41% in Asia from 29% on Thu FEDWATCH

• Diverging Fed-RBA rate expectations, rally in equities & commodities support

• Persistent concerns over China's economy, AUD/JPY sales limit AUD gains

• Saturday China activity data key; Asia range 0.67215-0.6733

• Resistance 0.6747,61.8% of 0.6824-0.6622 drop; support 0.6695-0.6700, 0.6675

• Links - WSJ: Click here ; FT: Click here

• For more click on FXBUZ

Synopsis:

ANZ expects the crude oil market to remain tight in the fourth quarter due to a combination of factors including OPEC's supply policies, bearish investor sentiment, and heightened geopolitical risks. Despite weak demand and seasonal trends, OPEC's adherence to production cuts and ongoing geopolitical tensions are likely to sustain a tight market.

Key Points:

1. OPEC Supply Policies: OPEC’s current supply policies are struggling to support oil prices amidst concerns of weaker demand. To maintain higher prices, OPEC may need to delay the phase-out of voluntary production cuts further to avoid perceptions of shifting to a market-share strategy.
2. Investor Sentiment: Investors are increasingly bearish on economic growth, contributing to weak sentiment in the oil market. This bearish outlook, combined with seasonal demand slowdowns, further pressures oil prices.
3. Geopolitical Risks: Elevated geopolitical risks, including high tensions in the Middle East and rising attacks on energy infrastructure related to the Russia-Ukraine conflict, are expected to contribute to a tighter oil market in Q4.

Conclusion:

ANZ anticipates that despite weak demand and bearish market sentiment, the crude oil market will remain tight in Q4. OPEC’s adherence to production cuts and ongoing geopolitical tensions are likely to offset the effects of seasonal demand slowdowns, maintaining a tight market environment.

GBP/USD extended its rise from Wednesday's 3-week low after the ECB's expected 25bp rate reduction, and is likely to drift higher as traders position for the Fed's widely anticipated 25bp cut on Sept.
18 as the BoE is seen keeping policy steady until its November meeting.

STIR markets currently price a significant widening of rate spreads between the U.S and UK, which top out at a 85bp by December 2025.

The problem for sterling bulls may come from recent successes in bringing inflation down toward the BoE's 2% target.

The significant reduction in price growth may provide a window for the BoE to quicken the pace of rate cuts in an attempt to jumpstart the UK economy.

While the market is pricing a subdued tack of UK rate cuts, it is worth remembering that the BoE has kept constant watch on growth, and even when inflation was much higher and rate hikes were clearly in order doves had voted to hold rates rather than risk stalling growth.

With inflation moving toward target, and sterling near 2024 highs, bulls may be wise to temper their enthusiasm in case the BoE shifts to a more dovish tack, which would send the pound careening lower toward early August lows by 1.2666.

For more click on FXBUZ

• Cable meets headwind pre-1.3071 after extending north from 1.3003

• 1.3071 was Asia low Wednesday. 1.3003 was three-week low Wednesday

• More offers expected around 1.3100 (1.3112 was Wednesday high)

• US jobless claims 230k, as forecast. US PPI up 0.2% MM vs 0.1% forecast

• Data underpins expectation that Fed will cut rates by 25 bps next week

• Lagarde stresses ECB's data-dependent approach, re: rate cuts nL1N3KU06H

• USD/JPY moves to day's low as USD 2-year Treasury yields retreat following mixed PPI, uptick jobless claims

• Gold hits record following an ECB rate cut though there may also be geopolitical risk element to its advance

• Price support is seen near 142.00 ahead of 141.43 lower Bollinger and 140.71 Wednesday’s low

• Spot gains are seen capped near 143 where Japanese exporter offers reside; 9-day MA and price congestion near 143.30 offers further resistance

• Yen bulls stay optimistic after BOJ policy hawk Tamura offered a reminder of central bank’s tightening bias

• Yen crosses largely track swings in risk appetite though an ECB rate cut may disrupt pattern; EUR/JPY marginally lower on session

• Selling Swissy versus yen favored should risk tone start to improve

• One-week yen volatility notches upwards to incorporate next week’s Fed decision

For more click on FXBUZ

Synopsis:

Credit Agricole revises its EUR/USD outlook, maintaining a negative stance but moderating its bearish forecasts for the next three to six months. The adjustments reflect changing expectations for Fed policy, US political dynamics, and European political stability.

Key Points:

1. Fed Easing Risk: Credit Agricole now anticipates a more front-loaded easing cycle from the Fed, which could diminish the USD's real rate appeal. Despite this, they doubt the Fed will meet current aggressive market rate cut expectations. They still foresee a USD recovery from current levels, albeit less pronounced than previously forecast.
2. US Presidential Election: The possibility of a closer race in the upcoming US presidential election is acknowledged, with potential implications for USD strength. A Trump victory could boost the USD in Q4 2024, although the chance of a Republican sweep has diminished, reducing the likelihood of a significant USD rally.
3. European Political Risks: Eased fears about political turmoil in France have lessened the impact of sovereign debt risks on the EUR. While downside risks to the EUR remain, they are expected to be less severe than before.

Conclusion:

Credit Agricole’s updated EUR/USD forecast suggests a modest improvement, with the pair expected to trade around 1.08 in Q4 2024 and Q1 2025, compared to earlier projections of 1.05 and 1.07. This revision reflects a more balanced view of Fed policy, US election uncertainties, and reduced political risks in Europe.

• BTC= up 0.5% to 57.8k in early NorAm, Thursday range 58.5k-57.1k

• ECB's expected 25bp cut nFWN3KU0II holds little sway on BTC

• Cryptos firm with risk, follow precious metals (supply concerns) higher

• ETF flows Click here and c.bank shift to lower rates props up BTC

• BTC res 58.5k Thurs high, 58.7k 50% Fib of 65k-52.5k, 60.8k the 55-DMA

• Supt 57.1k Thurs low, 56.4k the 10-DMA, 55.4k Sept 11 low

For more click on FXBUZ