• Steady after closing down 0.45% with the U.S. dollar up 0.45%

• Sterling likely quiet in Asia ahead of today's UK unemployment data

• Expecting tight range trading in Asia led by the US dollar and risk appetite

• Charts - Friday's bearish outside day, was confirmed by Monday's fall

• 5, 10 & 21 daily moving averages coil as daily momentum studies slip

• 21-day Bolli bands contract - a neutral setup but the uptrend struggles

• Monday's 1.3142 high then Friday's 1.3238 top are first resistance

• A close below 1.3038, 38.2% April/August rise would be a bearish signal

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• AUD/USD stays offered in Asia after closing 0.15% lower on Monday

• Broadly stronger USD weighs as traders reduce bets on larger Fed rate cut

• Chances of a 50 bps cut in Sep at 29%, had jumped to 50% after NFP data Fri

• Growing concerns over China's economy, weak commodity prices undermine AUD

• China August trade data Tuesday and U.S. CPI Wed key for immediate trend

• Monday range 0.6688-0.6648; supports 0.6642-47, 0.6620-25,

• Resistance 0.6685-90, 0.6720-25

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• +0.05% after closing down 0.45% with the U.S. dollar up 0.45%

• Draghi - EU needs to be faster on decisions, investment to match US/China

• As Germany struggles economically, fresh ideas may be the answer

• Charts; daily momentum studies slip, 21-day Bollinger bands contract

• 5, 10 & 21-day moving averages coil - mixed signals show little bias

• A close below 1.0996, 0.382% of the Jun/Aug rise ends the uptrend

• Monday's 1.1090 high then Friday's 1.1155 top are initial resistance

• 1.1000 1.907 BLN and 1.1040/50 1.963 BLN are the close Sep 10th strikes

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Synopsis:

ING expects EUR/USD to remain near the 1.1100 level this week, with the European Central Bank's policy meeting being the key focus. A 25bp rate cut is anticipated, but significant downward revisions to inflation forecasts could negatively impact the euro.

Key Points:

• Market Reaction:

  • Friday’s Performance: EUR/USD struggled to maintain intra-day gains as market participants remained uncertain about whether the Fed will cut rates by 25 or 50 basis points.
  • ECB Meeting Focus: A 25bp rate cut is expected at the ECB's meeting on Thursday, with the quarterly forecast update being crucial. Significant downward revisions to back-year inflation forecasts could weigh on the euro.

• Near-Term Outlook:

  • EUR/USD Range: The pair is expected to stay around 1.1100 over the next few days. External factors such as the US election debate might influence movements but are not anticipated to cause significant deviations.

Conclusion:

ING predicts that EUR/USD will likely hover near 1.1100 in the short term. While a 25bp rate cut by the ECB is expected, any major downward adjustments to inflation forecasts could negatively affect the euro. The upcoming US election debate may be a notable factor driving the currency pair in the near term.

Corrects level in first bullet, removes reference to fix

• USD/JPY finds intraday buyers near ~142.65/66

• US share gains and higher UST 2-year yields support pair; US consumer credit in July rose $25.45 billion or double expectations

• Expiries this week near 142 should limit USD downside

• Japan to see money supply data for August on Tuesday

• Yen crosses are little changed for New York’s session, MXN/JPY finds support ahead of 7.00

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The dollar index rose on Monday as fears of a hard U.S. landing ebbed, lifting shares and commodity prices.

The ICE dollar index was up 0.3% in modest turnover with the greenback gaining against nearly all its G-10 peers.

The euro dipped to short-term support near 1.1010/30 where buyers emerged despite looming risks of an ECB rate cut Thursday.

Germany's government announced temporary controls on the country's land borders on Monday.

The pound fell amid late-day speculative sales ahead of Tuesday’s UK employment report.

Treasury yields were mixed as 2-years rose 2 basis points and the 10-year was little changed, the 2s-10s curve flattening 3.04bp to still positively sloped 2.98bp at the mid level.

The S&P 500 rose 0.91%.

WTI rose 1.60% fueled by share gains, a potential U.S. Gulf of Mexico hurricane and Libyan supply disruption.

Copper advanced 1.55% amid broad gains in industrial metals.

Gold firmed 0.17% amid lower Treasury yields.

Heading toward the close: EUR/USD -0.39%, USD/JPY +0.46%, GBP/USD -0.35%, AUD/USD -0.14%, DXY +0.36%, EUR/JPY -0.03%, GBP/JPY -0.12%, AUD/JPY +0.13%.

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• NY opened near 1.1040 after 1.10908 traded on EBS overnight, slide extended

• Wider DE-US spreads US2DE2=RR, firm US yields & US$ weighed on the pair

• EUR/USD fell further but only traded down to 1.10343, buyers emerged

• US yields, US$ softened; USD/CNH erased some gains & EUR/JPY rallied

• Stocks ESv1 and commodities XAU=LCOc1 gained to help weigh on US$

• EUR/USD neared 1.1055 late but still traded down -0.30% in NY's afternoon

• Falling RSIs, move below 5- & 21-DMAs gives technicals a bearish lean

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Synopsis:

ANZ anticipates that this week's UK labor report, focusing on wages and employment data for July, will have a limited impact on GBP performance. Despite a cooling labor market and potential softness in wage growth, the currency's strength is expected to persist against the EUR, though short-term risk-off sentiment may favor the EUR.

Key Points:

• Labor Market Focus:

  • Wages Data: Average weekly earnings growth has been a persistent issue in the BoE's efforts to control inflation. Pay increases in the financial and public sectors have driven the strong headline figures, but wage growth is expected to ease.
  • Employment Data: The UK labor market shows signs of cooling, with rising jobless claims and decreasing employment growth expectations from the BoE’s Decision Maker Panel (DMP).

• Market Impact:

  • GBP Outlook: Softer labor market or wage data are unlikely to significantly alter GBP momentum. The currency remains optimistic, particularly against the EUR, due to solid growth fundamentals.
  • Short-Term Trends: Risk-off sentiment is expected to favor the EUR slightly over the GBP, which may result in some short-term upside bias for EUR/GBP.

Conclusion:

ANZ believes that while the UK labor report may reflect a cooling labor market and softer wage growth, these factors are unlikely to drastically shift GBP performance. The GBP is expected to remain strong against the EUR, though EUR/GBP may see some upward movement in the near term due to prevailing risk-off sentiment.

• AUD/USD fell below the 55-DMA overnight after 0.66885 traded

• NY opened near 0.6660 & the overnight drop initially extended

• US yield US10YT=RR gains rallied US$; USD/CNH traded near 7.1250

• AUD/USD traded down to 0.6648, the pair's slide then stalled

• Yields & US$ softened while stocks ESv1, gold XAU= rallied

• USD/CNH dipped below 7.1150 & AUD/JPY rallied toward 95.50

• AUD/USD climbed back above the 55-DMA, neared 0.6675, was up +0.04% late

• Daily RSI diverged, daily doji formed; they may be concerns for shorts

• Falling monthly RSI, hold below 10- & 21-DMAs may concern longs

• Aug. NAB business conditions, confidence are data risks in Asia

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Synopsis:

BofA anticipates the European Central Bank (ECB) will implement a 25 basis point (bp) cut to the deposit rate at its September meeting, with a modestly negative impact on the EUR due to unchanged guidance and weaker growth outlook.

Key Points:

• Rate Cut Expectation:

  • Deposit Rate: Expected to be reduced by 25bp.
  • Other Policy Rates: Likely to adjust by 35bp due to the previously announced narrowing of the rate corridor.

• Guidance and Statement:

  • Assessment: The statement will likely acknowledge that incoming information supports the ECB’s previous inflation outlook but highlights weaker growth.
  • New Forecasts: Expected to show lower growth projections, a slight increase in near-term core inflation, and an unchanged medium-term outlook. Inflation is anticipated to approach 2% by the end of 2025.
  • Domestic Price Pressures: Expected to be flagged, particularly in relation to high services price inflation.

• Forward Guidance:

  • Approach: The ECB is likely to maintain its data-dependent, meeting-by-meeting approach to policy adjustments.
  • Risks: There may be a slight dovish tilt given the weakening growth outlook and internal discussions about whether this necessitates faster rate cuts.

• Impact on EUR:

  • Expectations: A 25bp rate cut is fully anticipated, so a significant market reaction is not expected.
  • Risks: There could be modestly negative risks related to the ECB’s guidance on growth concerns.

Conclusion:

BofA predicts a 25bp rate cut by the ECB with no significant change in guidance, leading to a limited impact on the EUR. The focus will remain on the data-dependence of future policy actions, with risks skewed towards a potentially more dovish stance due to weaker growth projections. The EUR's reaction is expected to be contained, reflecting the ECB's consistent approach to data-driven decision-making.

Sterling slipped further away from recent trend highs as traders reacted to less enthusiastic market expectations for a jumbo Fed rate cut this month, which may keep the pound on the back foot as markets await a slew of U.S. and UK data with policy implications for the Fed and BoE.

Sterling's recent rise to 2024 highs at 1.3269 was based on diverging Fed-BoE rate expectations, and though the outlook on rate spreads has not changed much heading toward year-end, the more near-term, September view has seen odds for a supersized cut diminish, which has caused a minor selloff.

It's worth noting that spec futures traders have not gone all-in on the current reversal of more extreme Fed cuts.

Friday's release of IMM spec positioning data indicated a significant rise in GBP long positioning, and though positioning is well below the July 23 all-time high, the sterling spec long has risen in the last few weeks from +47.8k contracts in mid-August to +108k as of Sept.
3.

With December 2024 UK-US futures strips, and 2025 prices, still indicating more deep Fed cuts, relative to the BoE, the current GBP/USD slide could be transitory barring a more dovish BoE shift.

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Synopsis:

Credit Agricole highlights the Swiss Franc (CHF) as one of the top-performing G10 currencies in Q3, driven by recent market dynamics and political developments. The upcoming Swiss National Bank (SNB) policy meeting could further influence the CHF’s trajectory.

Key Points:

• Drivers of CHF Strength:

  • Collapse of Carry Trade: Weaker US labor data and a dovish Fed have bolstered funding currencies like the CHF.
  • Political Risks in France: Ongoing political uncertainty following July’s inconclusive elections has supported the CHF as a safe-haven currency against the EUR.

• SNB September Meeting Expectations:

  • Market Pricing: Swiss rates markets are anticipating a 25bp cut in September, with another 25bp cut projected for December. This expectation includes a potential dovish forward guidance from the SNB.
  • Potential CHF Impact: While dovish guidance might limit further CHF appreciation, any indications that SNB rates are nearing their lower bound could challenge current dovish expectations and strengthen the CHF.

• Near-Term Outlook:

  • Political Developments: The appointment of Michel Barnier as France’s caretaker Prime Minister might alleviate some of the political risks, potentially leading to EUR/CHF consolidation.
  • Data Calendar: With recent CPI, GDP, and labor market data releases, the Swiss data calendar is expected to be quieter in the near term.

Conclusion:

Credit Agricole remains cautious about further CHF appreciation ahead of the September SNB meeting, given the fully priced-in rate cuts and potential dovish guidance. However, any signals from the SNB suggesting that rates are approaching their lower bound could shift market expectations and bolster the CHF. Political developments in France may also impact CHF dynamics against the EUR

Synopsis:

Goldman Sachs expresses caution on holding tactical long positions in the Japanese Yen (JPY) in the near term, despite its attractiveness as a hedge against a slowing US economy and potential recession risks.

Key Points:

• Economic Context:

  • US Economy: Slowing economic conditions and increased recession risks make the Yen a favorable hedge.
  • Macro Forecasts: More balanced macro forecasts suggest the USD/JPY cross may trend higher, limiting significant upside for the Yen.

• Factors Influencing JPY Outlook:

  • Interest Rates and Risk Sentiment: If rates remain stable and risk sentiment remains supportive, recent Yen strength could unwind.
  • US Activity Data: Continued softening in US economic data or difficulties in equities adjusting to gradual Fed cuts could lead to further Yen appreciation.
  • BoJ Policy: Any JPY gains might offset potential Bank of Japan (BoJ) hikes.

• Cautionary Notes:

  • Tactical Longs: Goldman Sachs advises caution on tactical long positions in the Yen, highlighting vulnerability to potential upside surprises in US retail sales.
  • Fed Outlook: The Yen's attractiveness as a hedge is contingent on the Fed's policy trajectory; shifts in Fed expectations could impact JPY dynamics.

Conclusion:

Goldman Sachs remains cautious on tactical long positions in the Yen despite its role as a hedge against a slowing US economy. They anticipate potential Yen strength may be limited if current economic and risk conditions persist, and any tactical long positions could be vulnerable to unexpected positive developments in US retail sales or shifts in Fed policy.

• Price action in FX options is not consistent with GBP/USD gains

• There's minimal demand to cover the risk of GBP gains with GBP call options

• 1-month risk reversal met sales of GBP calls after brief flip in late Aug

• That contract retains a small downside strike premium since

• Implied volatility under pressure as post NFP risk premiums pared

• Lower implied volatility consistent with range trade/low realised volatility

• Resistance 27 Aug hi 1.3266, March 2022 hi 1.3298, 1.3300 option barriers

• U.S. CPI on Wednesday but volatility risk premiums far below those prior NFP

• Standout FX option strike expiries this week nL1N3KR06U

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Before Friday's U.S. jobs data, price action in FX options was clearly concerned about EUR/USD breaking/extending the recent 14-month high at 1.1201, but not any more.

Option trade flows had seen strong demand and premium gains for sub 1-month expiry 1.1200-1.1300 strikes, which allow holders to buy EUR/USD at those levels if better than the spot price at expiry.
Those options are being pared.

Risk reversals are an option volatility trade that benefit from increased FX volatility in a particular direction.
The benchmark 1-month expiry 25 delta contract had posted new 4-year highs for EUR calls over puts at 0.4 amid the late August spot highs (EUR/USD topside over downside strikes), before quickly reverting to 0.1 EUR puts over calls (downside strikes).
The contract had recovered a 0.2 topside strike premium on Friday, before slipping to 0.1 EUR calls thereafter.

Implied volatility gauges the unknown yet key FX realised volatility that is crucial to an FX option premium.
It has fallen since the jobs data event risk premium was removed, and as familiar ranges and large option expiries are helping to limit volatility and contain price action, despite the impending U.S. CPI data.

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• Traders pared small amount of big bullish gold positions week ending Sep 3

• Traders have a tendency to reduce exposure ahead major events

• Federal Reserve may opt to cut interest rate for first time on Sep 18

• Few bigger events and few larger bets on gold than current long position

• A correction may prove to be healthy for the uptrend

• Oil might bottom influencing currencies nL1N3KR08B

• Six consecutive daily bull sessions into Friday's close

• Close above the 10-day moving average encouraging for bulls

• Our 0.8445 long play back in the game having weathered a drop to 0.8401

• Early Monday and stalling looks corrective

• Daily RSI flat lining at neutral levels while momentum remains negative

• An October 1 0.8504-09 cloud twist also favouring the EUR

• EUR/GBP Trader TGM2343

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• Cable drops to threaten 1.3100 as less dovish Fed expectations buoy USD

• 1.3100 approximates to last Wednesday's low (1.3111 was Friday's low)

• Markets currently see 29% chance of 50 bps Fed cut next week FEDWATCH

• That probability is much lower than the 57% shortly after Friday's NFP data

• 1.3088 (last week's low) and 1.3069 (21DMA) are support points below 1.3100

• CFTC data showed net GBP long rose 20% to five-week high in week to Sept 3

• EUR/USD rallied to 1.1155 Friday then turned lower

• Daily RSI diverged on a seven-day high and a daily inverted hammer formed

• Price is back below the 10-day moving average, 1.1090

• Daily kijun support at 1.1042 and key support at 1.1026, Sept. 3 low

• We lean bearish and might go with a break under 1.1020

• Bear bets off above 1.1155, Friday high

• EUR/USD Trader TGM2334

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• Choppy Friday action resulted in a swing to 1.3238, hitting our short stop

• Subsequent 1.3130 bear close and long upper shadow keeps the bear bias alive

• Fourteen day momentum remains positive but is fading

• Daily RSI is falling but is currently at a neutral level

• Sept. 3 1.3088 low now a pivotal support point

• Last week's 1.3238 high the key level topside, ahead of 1.3269 2024 high

• GBP/USD trader TGM2338

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• GBP/USD +0.1% in Asia, steadies after Friday's choppy price action

• Upside limited on Wall St swoon, fading bets of a 50 bps Sep Fed rate cut

• UK labour market loses steam in Aug, recruiters say; may lift BoE cut hopes

• UK employment, wages, July GDP, industrial output, trade data due this week

• U.S. CPI, China inflation, trade and monthly activity data also key

• Asia range 1.3128-1.3142; support 1.3100-10, 1.3040-50, resistance 1.3180-90

• For more click on FXBUZ

• AUD/USD +0.2%, drifts higher on light short-covering after sharp fall on Fri

• Upside limited as risk aversion grips Asia following Wall Street swoon

• Lacklustre China inflation data exacerbates; ASX200-0.7%, Shanghai Comp-0.9%

• Weak commodity prices likely to weigh; Dalian iron hits 1-year low in Asia

• U.S. inflation , China trade and monthly activity data key this week

• Support 0.6640-45, resistance 0.6700-05, 0.6725-30; Asia range 0.6664-0.6688

• For more click on FXBUZ

• +0.05% after closing -0.35% - the firmer USD, soured risk appetite weighed

• UK labour market and wages lost steam in August, recruiters say

• If upcoming data confirms the softer data, BOE rate expectations will change

• UK PM Starmer in Dublin at the weekend, working to repair EZ relations

• Charts - A bearish outside day, 5, 10 & 21 daily moving averages coil

• momentum studies slip, 21-day Bolli bands contract - a neutral setup

• Friday's 1.3238 top and the 1.3269 August high are first resistance

• A close below 1.3038, 38.2% April/August rise would be a bearish signal

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• +0.05% after closing -0.2%, capped by the firmer USD & yen - EUR/JPY -1.1%

• Friday's weak German industrial output -2.4%, led by an 8.1% automotive fall

• It is hard to be optimistic on Eurozone growth as Germany struggles

• Charts; daily momentum studies slip, 21-day Bollinger bands contract

• 5, 10 & 21-day moving averages coil - mixed signals show little bias

• Well tested 21 DMA proved resilient last week - close at 1.1080 today

• A close below 1.0996, 0.382% of the Jun/Aug rise ends the uptrend

• 1.1050 2.390 BLN, 1.1100 1.323 BLN, 1.1125 1.502 BLN close Sep 9th strikes

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