• USD net spec long flipped to short in Nov 29-Dec 5 period; $IDX +1.35%

• EUR$ -1.77% in period; specs +9,195 contracts now long 152,360 contracts

• $JPY -0.24%; specs +4,281 contracts, now short 104,956 contracts

• Yen gained after period closed on more-hawkish BoJ talk, BoJ meets 19 Dec

• GBP$ -0.88%; specs +19,560 contracts, pos flips to long 11,665

• AUD$ -1.4% in period, specs +13,538 contracts, now -57,681

• $CAD +0.15%, specs +5,394 contracts, now -57,848 contracts

• BTC +15.6% in period; specs -505 contracts into new 2023 highs

• Note: post-payrolls surprise rise USD gained on diminishing dovish Fed outlook

• USD/JPY's massive 147.295-141.60 Dec. 7 drop is being retraced

• Rebound capped so far by the daily tenkan at 145.22

• Prices well below kijun & weekly tenkan at 146.76

• Those are by up TL from March crashed below on Thursday

• As well as the 10-DMA that should limit recovery attempts

• Rebound looks set to forestall a close below weekly kijun at 144.58

• Reversal of 2023's rise is in play after 2023/22 double-top at 32-yr highs

• Eventual drop to 50% of 2023 rise & weekly cloud top at 139.57 is likely

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• USD/JPY's rebound from Thur's 141.60 depths aided by bullish US data

• Rebound so far capped at the 145.22 daily tenkan on EBS

• Huge double-top and reversal of 2023 rise intact sub-146.76

• That level is the daily kijun and weekly tenkan

• Tsy ylds surged 13bp after broad beats by jobs data, Mich sentiment

• Prices were already shedding Thur's O/S drop and quick BoJ hike hopes

• Focus now on CPI & PPI into Wed's Fed announcement, presser

• Futures no longer favor a March Fed cut; just 110bp of cuts by end 2024

• Had been pricing in five 25bp rate cuts recently

• BoJ rate hike hopes got overdone Thur, but Fed-BoJ convergence eyed in 2024

• Pace of convergence and USD/JPY retracement of 2023 uptrend are the issue

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Synopsis:

Danske Bank prefers selling EUR/USD through options rather than spot trading for 2024, based on their medium-term fair value estimation and current market positioning. This strategy is designed to capitalize on potential declines in EUR/USD while managing associated risks.

Key Points:

• EUR/USD Fair Value: Danske Bank's medium-term (1-3 years) fair value for EUR/USD is slightly above parity at 1.01, suggesting the current level of the cross is fundamentally overvalued.
• Market Positioning: IMM positioning indicates a long bias in EUR, with a general consensus towards a stronger EUR/USD next year.
• Risk of Sharp Movements: Given the overexposure, there could be sharper movements in response to adverse news or data, particularly if the market focus shifts from inflation to weaker growth, potentially triggering a risk-off period and supporting USD.
• Options Strategy Preference: Danske Bank opts for an options trade rather than a spot trade due to perceived near-term upside risks to EUR/USD. They see value in buying a 6-month at-the-money (ATM) put-spread.
• Volatility and Risk Management: The current volatility is considered neutral-to-cheap, and higher volatility is expected during the trade horizon. This options strategy provides a structured way to benefit from a potential EUR/USD decline while defining and limiting risks.

Conclusion:

Danske Bank's strategy for 2024 involves selling EUR/USD through options, informed by their analysis of the currency pair's fundamental overvaluation and current market positioning. This approach aims to exploit potential downward movements in EUR/USD, while the choice of an options trade over a spot trade is based on managing the risks associated with the anticipated market volatility and positioning dynamics.

• GBP$ soft into NY cls, -0.4% at 1.2547; NorAm range 1.2583-1.2504

• Early dip on higher UST yields added to after unexpectd payrolls rise

• Payrolls rise tempers recent uber-dovish Fed expectations for 2024 IRPR

• Sterling eyes 200-DMA support below 1.25 after US payrolls rise nL1N3D31FL

• Supt at bruised 21-DMA (1.2536), Fri low 1.2504, 200-DMA 1.2486

• Res 1.2606 Fri high, 10-DMA 1.2628, Nov 27-Dec 4 highs just above 1.27

• Focus on UK employment, U.S. CPI Dec 12, Fed rate decision, comments Dec 13

Synopsis:

ANZ suggests buying USD/JPY around 143, targeting a move towards 147 in anticipation of the upcoming December Bank of Japan (BoJ) meeting. This recommendation is based on the typical pre-meeting pattern observed in the currency pair and the current economic conditions in Japan.

Key Points:

• Pre-Meeting Pattern in USD/JPY: The USD/JPY often exhibits initial weakness (JPY strength) due to expectations of potential BoJ policy changes, followed by JPY weakness when these expectations are not met. This pattern is expected to continue into 2024.
• Inflation and Economic Conditions in Japan: Inflation in Japan remains below the BoJ's 2% target and is showing signs of losing momentum. The economy is struggling, as indicated by weak wages, consumer activity, and a significant drop in Q3 GDP.
• Long Positions Strategy: Historically, long positions in USD/JPY ahead of BoJ meetings have been rewarding. Potential dips in USD/JPY before the meeting are seen as good opportunities to go long.
• Potential Impact of BoJ Policy Tweaks: Even if the BoJ adjusts its policy marginally, the market reaction is expected to be brief, similar to past short-lived reactions in JPY movement.

Conclusion:

ANZ's recommendation to buy USD/JPY around 143 with a target of 147 ahead of the BoJ meeting is based on historical patterns and current economic indicators in Japan. The strategy anticipates that initial expectations of BoJ policy changes will likely not be met, leading to opportunities for gains in USD/JPY. The forecast also accounts for the possibility of short-term market reactions to any minor policy adjustments by the BoJ.

• Cable elicits support just shy of 1.2500 after sliding from 1.2572

• 1.2572 was rally high from 1.2513 low following US jobs data release

• Dollar buoyed by unexpected US jobless rate fall to 3.7%, from 3.9%

• Lower jobless rate is blow for doves advocating first Fed rate cut in March

• More GBP/USD bids expected around 1.2486 (200DMA) and 1.2450 (Nov 22 low)

• US CPI data is key economic release before Fed event risk next Wednesday

Synopsis:

Bank of America (BofA) provides an outlook for Canada's economy in 2024, predicting a slowdown in GDP growth and expecting this to lead the Bank of Canada (BoC) to cut interest rates. Concurrently, BofA forecasts a gradual decline in the USD/CAD exchange rate throughout 2024.

Key Points:

• GDP Growth Deceleration: BofA forecasts Canada's GDP growth to slow to 0.9% in 2024 from 1.1% in 2023, influenced by high interest rates in Canada and a slowdown in US growth.
• Downside Risks to Growth: There are concerns about households being more sensitive to high interest rates, although low unemployment and high oil prices could provide some economic buffer.
• Rising Unemployment Rate: The unemployment rate in Canada is expected to increase.
• Inflation Deceleration: Inflation is projected to slow down near the target in 2024, which would enable the BoC to start cutting rates to 3.75% by the end of 2024, beginning in June.
• USD/CAD Exchange Rate Forecast: BofA estimates that USD/CAD was about 2% overvalued in November. They predict the fair value range for USD/CAD to be around 1.34-1.35 in the first half of 2024, with a further downward trend in the second half, aligning with the start of the Fed cutting cycle. The forecast for year-end 2024 is a fall to 1.30.
• Risks to Forecast: Potential risks include a delayed start to the Fed's rate-cutting cycle compared to the BoC or a macroeconomic environment that turns bullish for the USD due to various shock scenarios.

Conclusion:

BofA's outlook for Canada in 2024 includes a slowing economy and rising interest rates, leading to potential rate cuts by the BoC. This economic backdrop is expected to influence the USD/CAD exchange rate, leading to a gradual decline throughout the year. However, this forecast is subject to risks, particularly relating to the timing of monetary policy changes and unexpected macroeconomic developments.

Synopsis:

CIBC reacts to the US November jobs report, noting significant strength in the labor market, with implications for the Federal Reserve's (Fed) policy stance.

Key Points:

• Strong Labor Market Performance: The November jobs report revealed robust labor market conditions, with employment rising to 199K, surpassing the consensus expectation of 185K and the previous month's figure of 150K.
• Net Negative Revisions: There were 35K net negative revisions over the previous two months, including the impact of auto workers returning from a strike, estimated to be between 30-40K.
• Decrease in Unemployment Rate: The unemployment rate fell to 3.7%, contrary to the consensus expectation of it remaining steady at 3.9%.
• Rise in Participation Rate: The labor force participation rate increased to 62.8%.
• Acceleration in Wage Growth: Nominal wage growth showed a significant uptick, rising to 0.4% month-over-month from 0.2% in the previous month.
• Implications for the FOMC: The strong labor market data is likely to draw attention from the Federal Open Market Committee (FOMC) and highlights the ongoing tightness in the labor market.

Conclusion:

The November jobs report indicates continued strength in the US labor market, with higher employment numbers, a reduced unemployment rate, and increased wage growth. These factors suggest a robust economic scenario that the FOMC will need to consider in its policy deliberations. Despite these strong labor market signals, the Fed's future policy direction will depend on a broader set of economic indicators and considerations, including inflation trends and broader economic stability.

• Thursday saw volatile trading, USD/JPY dropped to 141.60, before rebounding

• USD/JPY sellers could have overextended themselves nL1N3D30NQ

• Spot has risen from 142.50 to 144.68, on Friday, EBS data shows

• USD/JPY's 'bear trap' signals a much bigger recovery nL1N3D30IO

• USD/JPY options braced for more volatility post extremes nL1N3D30GZ

• 30/60-day correlations between USD/JPY and EUR/JPY are above +0.50

• Fin Min: closely watching FX market moves nP8N3BM04C

• Nonfarm payrolls forecast increasing 180,000 in November nL1N3D22LI

• AUD/USD has traded on 0.66 handle since European open; 0.6603 = session low

• 0.6620 was Asian session high (0.6620 was also Thursday's high)

• US jobs report due 1330 GMT; Nov NFP forecast 180k. Goldman estimates 238k

• Big NFP beat might depress AUD/USD towards 0.6526 (Thursday's two-week low)

• US unemployment rate forecast at 3.9%, with 'Sahm Rule' formula in focus

• RBA rate decisions to be made by a new Monetary Policy Board (9 members)

USD/JPY could be set to stage a much bigger recovery in coming sessions, as the price action points to an oversold market.

Investors in Japan's yen have jumped at what they see as the clearest sign yet from the country's monetary authorities that the end of ultra-low interest rates is fast approaching, opening the floodgates to a rush of buyers.
However, there are signs that those yen buyers could well be overextended in the short-term.

USD/JPY's long tail on Thursday's candlestick line points to a downside rejection, which increases the likelihood of a bigger recovery to test the kijun line -- the midpoint of the last 26 trading days -- currently at 146.76.

The failure to close below the 142.85 Fibo, a 61.8% retrace of the 137.25 to 151.92 (July to November) EBS rise, hints at a bear trap.
A bear trap is set when a market breaks below a technical level but subsequently reverses and is usually a bullish sign.

For more click on FXBUZ

• There are three technical reasons to expect a bigger EUR/USD drop

• EUR/USD has closed under the 1.0800 Fibo for three days in a row

• 1.0800 Fibo is a 38.2% retrace of the 1.0448 to 1.1017 (Oct-Nov) EBS rise

• 14-day momentum has turned negative Monday for the first time since October

• Momentum has become increasingly negative each day since Monday

• Daily "cloud twist" just below 1.0670, on Dec. 19, will likely attract spot

• The "cloud twist" is when the cloud extremes, senkou spans A and B, cross

• Offer at 1.0799. EUR/USD Trader TGM2334. Prev update nL1N3D10N6

• Implied volatility gauges realised volatility and determines option premium

• Posted huge gains Wed-Thurs as shorts forced to cover the rapid USD/JPY drop

• 1-week implied volatility 10 to 18, 1-month 8.8 to 11.5 - highs since July

• Downside vs upside strike premium on 1-month risk reversals to July high 1.9

• USD/JPY trades have dominated in Asia Fri - reflect fear of more volatility

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• Cable falls to 1.2563 before US jobs report at 1330 GMT; NFP f/c at 180k

• 1.2563 is low since Thursday's 1.2613 high (1.2614 was Wednesday's high)

• NFP beat could lift the dollar, while a miss might weigh on it nL4N3D20QW

• 1.2546 (Thursday's low) and 1.2527 (Nov 24 low) are GBP/USD support points

• Resistance levels beyond 1.2614 include 1.2650 (Tuesday's high) and 1.2700

• BoE rate decision next week (Dec 14), hawkish hold expected nL8N3D15P9

Adds RSI to second bullet

• Loss consolidation below the 10-day moving average, 1.2633

• Daily momentum readings are finally reflecting the bear bias

• Daily RSI now neutral from over bought territory earlier in the week

• Dec. 21 1.2313-17 cloud twist fighting the bears' corner

• A 38.2% Fibo off 1.2039-1.2733 is at 1.2468

• Weekly action set to buck a three-week bull run

• We lean bearish but stand aside for now

  For more click on FXBUZ

• EUR/USD opened +0.27% at 1.0793 after USD/JPY collapse dragged USD lower nL1N3D211L

• USD/JPY remained volatile - trading 142.50/144.15 while EUR/USD slumbered

• EUR/USD traded in a 1.0784/99 range and was 1.0790 into the afternoon

• Resistance is at 1.0860/70 where the 10 & 21-day MAs converge

• A close above 1.0870 would ease the downward pressure built up this week

• Support is at the 50% of the 1.0448/1.1017 rise at 1.0732

• Range trading likely ahead of the US non-farm payrolls later today

• Key will be reaction in US Treasury market and impact on Fed expectations

• For more click on FXBUZ

• -0.1% at the base of a 1.2586-1.2606 range ahead of volatile U.S. payrolls

• UK starting salaries rise at slowest pace in nearly 3 years - REC

• Good news for the BoE into the Dec 14 rate decision - hawkish hold likely

• Charts; 5, 10, and 21-day moving averages coil as momentum studies flat line

• 21-day Bollinger bands contract - technical signals show no strong bias

• Resilient 1.2721. 61.8% of the Jul-Oct fall remains the major resistance

• A close below 1.2467, 38.2% of the October/November rise would be bearish

• 1.2538 21-day moving average and 1.2606 Asian top first support, resistance

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• AUD/USD opened +0.82% at 0.6602 after USD led USD broadly lower nL1N3D2267

• It dipped to 0.6592 early Asia on AUD/JPY selling flows

• USD/JPY fell sharply from 144.00 to 142.50 and USD moved broadly lower

• AUD/USD traded up to 0.6611 before settling back at the opening level

• AUD/USD resistance is at yesterday's 0.6622 high and trend high at 0.6690

• Support is at the 200-day MA at 0.6576 and 21-day MA at 0.6553

• AUD/USD will likely range trade ahead of US non-farm payrolls later today

• Reaction in US bond market and Wall Street to jobs data key to FX moves

• AUD/USD has a positive bias after bullish outside day Thursday

• For more click on FXBUZ

• USD/SGD extends lower to 1.3359, targets 1.3343 support

• Fri close below that engages Bollinger downtrend channel

• Fresh selling cued by USD/JPY decline resuming, last 142.58

• Further losses possible as bets on BOJ ending easing build

• Though the odds of it are slim, long USD/JPY bets too crowded

• US NFP due later today may cue more USD volatility

• For more click on FXBUZ

• +0.05% after closing up 0.25%, as yen strength pushed the USD lower

• Economists now expect the BoE will remain on hold for the first half of 2024

• BoE will be data-driven, so upcoming data will be key for rate moves

• Charts; 5, 10, and 21-day moving averages coil as momentum studies flat line

• 21-day Bollinger bands contract - technical signals show no strong bias

• Well tested 1.2721. 61.8% of the Jul-Oct fall remains the major resistance

• A close below 1.2467, 38.2% of the October/November rise would be bearish

• 1.2538 21-day moving average and 1.2613 NY top are first support, resistance

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• EUR/USD opens +0.27% after huge USD/JPY fall dragged USD broadly lower nL1N3D2267

• It traded as high as 1.0818 before late recovery in USD/JPY helped cap

• EUR/USD not trending - so whippy trading days likely before trend emerges

• Resistance is at 1.0860/70 where the 10 & 21-day MAs converge

• Support is at the 50% of Oct/Nov rise at 1.0732 with bids at 1.0750

• Moves in Asia will likely be driven by USD/JPY volatility

• EUR/USD may stay sidelined ahead of key US jos data later today

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• AUD/USD opens +0.82% after USD broadly eased led by 2.5% fall in USD/JPY nL1N3D2267

• Bounce in key commodities also supported AUD as NY copper rose 1.85%

• AUD/USD completed a bullish outside day reversal to shift pressure to upside

• Resistance is at the Dec 4 and four-month high at 0.6690

• Support is at the 200-day MA at 0.6576 and 21-day MA at 0.6553

• Key today will be Tokyo reaction to large moves in USD/JPY offshore

• Market will also be positioning for the key US non-farm payrolls later today

• For more click on FXBUZ

• USD/JPY's 127.215-151.92 2023 uptrend is imploding

• The 38.2% Fibo of that rise at 142.48 was breached

• But prices well off 141.60 low and above 142.48 heading toward close

• Roughly 4% drop from Thur's high to the 141.60 low on EBS

• Close below 144.58, 50% Fibo of Jul-Nov rise keeps, 142.48 in play

• That Fibo was breached Thur but close below looks less likely

• The 200-DMA by 142.30 is also in play

• Close below the DMA and Fibo eyes 50% of 2023 rise at 139.57

• That's also by the weekly cloud top and 161.8% Fibo off Nov top

• Daily RSI O/S and lower 10-day Bolli is at 144.36 last

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