Synopsis:

ANZ recommends going long AUD/NZD in early 2025, anticipating AUD outperformance driven by diverging monetary policies, growth dynamics, and New Zealand's diminishing carry advantage.

Key Points:

• Year-End Weakness in AUD/NZD:

  • Seasonal factors and risk sentiment tend to drive AUD/NZD lower into year-end.
  • Strong NZD demand from seasonal exporter flows in November and December typically supports the NZD.

• Medium-Term Trade Opportunity:

  • Current levels around 1.08 present an opportunity to establish long positions in AUD/NZD.
  • Target range: 1.10 and above in 2025.

• Monetary Policy Divergence:

  • ANZ expects the RBNZ to cut rates earlier and more aggressively than the RBA:
    • RBNZ: 50bp cut expected in February 2025, with a total rate of 3.4% by end-2025.
    • RBA: Rate cuts to begin in May 2025, with a total of only 50bp, leaving the policy rate at 3.8% by end-2025.

• Relative Economic Growth:

  • Australia’s GDP outlook appears more optimistic than New Zealand's:
    • RBA forecasts moderate growth, while RBNZ anticipates a Q3 contraction of -0.2% q/q before mild recovery.
  • Australia's smaller current account deficit also supports the AUD.

Conclusion:

While seasonal factors and risk sentiment may temporarily weaken AUD/NZD into year-end, ANZ sees this as an opportunity to build long positions around 1.08, targeting 1.10 and above in 2025. Diverging monetary policy and stronger Australian growth dynamics provide a robust foundation for AUD outperformance.

Synopsis:

Goldman Sachs anticipates an above-consensus increase of 235k in November payrolls, driven by the return of striking workers and a reversal of hurricane impacts. They expect unemployment to hold steady at 4.1% and average hourly earnings to rise modestly.

Key Points:

• Payroll Growth:

  • Anticipated increase of +235k, boosted by:
    • Striking workers returning (+37.5k).
    • Reversal of hurricane-related job losses (+50k).
    • Potential drag from a later Thanksgiving and Black Friday affecting retail hiring (-15k).
  • Suggests averaging October and November payrolls to adjust for special factors.

• Unemployment Rate:

  • Expected to remain at 4.1% (rounded from 4.145%).
  • Composite slack tracker indicates slightly worse labor market conditions than suggested by the unemployment rate.

• Wages:

  • Forecasted 0.2% m/m increase in average hourly earnings, reflecting a hurricane-related drag.
  • Year-over-year wage growth expected to moderate to 3.8%.

• Revisions Risk:

  • Survey response rates in October were unusually low due to hurricane disruptions, raising the likelihood of larger-than-normal revisions for both months.

Conclusion:

Goldman Sachs projects robust payroll growth in November, driven by special factors like hurricane recovery and strike resolutions. While unemployment is expected to hold steady, wage growth may ease. Markets should prepare for potential revisions due to last month’s low survey response rates.

• EUR/USD 0.25%, USD/JPY -0.33%, GBP/USD 0.21%, AUD/USD 0.16%

• S&P E-minis -0.03%, DAX 0.42%, Nikkei 225 0.3%, FTSE -0.01%

• EUR/USD traders acting prudently likely to be rewarded nL2N3N609R

• USD/JPY suffers a minor setback, but solid support underpins nL2N3N609E

• GBP/USD gravitates towards large 1.2750 option expiry nL2N3N607H

• AUD/USD runs into resistance around 0.6450, again nL2N3N60B2

• Option expiries nL2N3N605Q. U.S. Open nL3N3N60SK

The latest Bank of England Click here (DMP) is largely in line with the quarterly rate cut narrative that policymakers have stuck by.

While there was good news on wage growth, having dropped to 4% in November from 4.1% in October on a three-month basis, improvements in CPI expectations look to have stalled.

Both the 1-year and 3-year CPI expectations appear to have flatlined at 2.6-2.7%, the latter hovering around these levels since the beginning of the year.
Consequently, with the BoE remaining squarely focused on inflation and particularly services CPI, the DMP survey backs the cautious approach and thus changes very little for the bank’s rate outlook in the short-run.

For sterling, with a slower pace of easing projected for the BoE versus its major counterparts like the ECB, the currency should continue to perform against the euro as the door remains open for a test of 0.82.

For more click on FXBUZ

• Sterling maintaining a bid tone and we have raised our long stop to entry

• Fourteen day momentum now confirming the price rally to 1.2740

• Daily RSI trying to lift from neutral levels

• Resistance levels are close by including a 50% Fibo

• The retracement level, 1.2761, is taken off the 1.3046-1.2475

• Developing support from the 10-day moving average, today at 1.2653

• GBP/USD trader TGM2338

  For more click on FXBUZ

• Implied volatility gauges actual volatility risk- key part of option premium

• EUR/USD FX option implied volatility lower as spot stagnates above 1.0500

• 1-month expiry implied volatility now 7.8 from 8.15 Wed and 8.8 on Monday

• However, near term event risk premium supports very short date expiries

• Overnight expiry now includes U.S. NFP - implied vol 15.5 from 13.5 on Wed

• 1-week expiry includes ECB - implied vol regains Wed's 10.5 peak from 9.5

For more click on FXBUZ

• EUR/USD looks set to drop due to a recent "bull trap"

• Spot failed to maintain last week's break above the 1.0563 Fibo

• 1.0563 Fibo is a 38.2% retrace of the 1.0937 to 1.0332 November (EBS) drop

• A "bull trap" is set when a mkt breaks above a tech level but then reverses

• 14-day momentum remains negative, highlighting the continued downside risk

• We remain short at 1.0500 in anticipation for losses to 1.0350

• EUR/USD Trader TGM2334. Previous update nL2N3N507U

• FX option pricing suggests EUR/USD losses may have run their course, for now

• Some profit taking on shorter dated downside strike options noted this week

• 1-month expiry implied volatility down 1.0 from l-term high at 8.8 Monday

• Premium for downside vs upside strikes on risk reversals already lower

• 1-week returns to neutral and 1-month is 0.6 from 1.1 peak USD calls 22 Nov

• Dealers also note some demand for near dated expiry strikes around 1.0600

• Large FX option strike expiries underpin spot, too, with more on Thursday

• 1.0300 FX option barriers may prove a tough nut to crack nL2N3N409L

• Assessing FX market impact of France's political crisis nL2N3N50BQ

For more click on FXBUZ

• AUD/USD unchanged in Asia after trading in a narrow 0.6422-0.6437 range

• Early selling pressure abates as AXJ currencies rise, U.S. yields stay soft

• Upside limited on scaled up RBA rate cut expectations after weak GDP on Wed

• 25 bps RBA rate cut fully priced in now for April; Odds of Feb cut at 51%

• Downside limited as Fed Dec rate cut odds rise and U.S. yields decline

• Strong support at 0.6400-05, clear break opens 0.6348-62

• Resistance 0.6440-45, 0.6475-80; Asia range 0.6422-0.6434

• For more click on FXBUZ

• +0.1% at the top of a tight 1.0509-1.0522 range with the USD off 0.1%

• German factory orders, French IP, EZ retail sales lead Eurozone data risk

• French no-confidence vote succeeds, deepening the political crisis

• Charts - daily momentum studies edge higher as 21-day Bolli bands contract

• 5, 10 & 21-DMAs coil, weekly moving averages fall - a modest bearish setup

• 1.0561 21 DMA caps, then the 1.0610 recent range top is pivotal resistance

• Last week's 1.0425 base and the November 1.0331 low are initial supports

• 1.0500 1.198BLN 1.0505 650 mln and 1.0525 1.140BLN strikes for December 5th

For more click on FXBUZ

Synopsis:

TD Securities sees a bullish trajectory for the USD in early 2025, driven by geopolitical and political economy (geomacro) dynamics. However, stretched USD positioning suggests a near-term pause. Into year-end, they favor long JPY positions against select G10 currencies.

Key Points:

• Geomacro Dynamics:

  • Political economy and geopolitics are becoming primary market drivers, surpassing central bank influence as they also react to these changes.
  • Technology disruptions exacerbate wealth inequality, voter dissatisfaction, and political instability, contributing to market volatility.
  • Supply chain disruptions from the pandemic and geopolitics continue to distort inflation metrics, creating uncertainty.

• USD Outlook:

  • Bullish USD expectations in early 2025, supported by geomacro themes.
  • Near-term, USD positioning and valuations appear overstretched, suggesting a pause before resuming an upward trend.

• Tactical FX Trade:

  • Preference for cross-G10 trades into year-end.
  • Favoring long JPY positions against EUR, GBP, CAD, and CHF, reflecting its relative undervaluation and safe-haven appeal.

Conclusion:

While TD expects USD strength to persist into 2025, near-term dynamics may prompt a temporary pause. For year-end tactical plays, they recommend focusing on G10 cross trades, particularly long JPY against EUR, GBP, CAD, and CHF, leveraging geopolitical uncertainty and stretched USD positioning.

• Off 0.03% in a 1.2696-1.2705 range with occasional solid FX Matching flow

• Under pressure, UK's Starmer sets out plans to deliver on election pledges

• Construction PMI leads UK data - MPC Member Greene Speaks - FT conference

• Techs - daily momentum studies climb, 21-day Bollinger bands contract

• 5, 10 & 21-day moving averages coil - neutral daily setup, bearish weeklies

• This week's 1.2619 low, then the 1.2475 November trend low initial supports

• Last week's 1.2750 high then 1.2841, 0.382% Sep/Nov fall first resistance

• A close above 1.2841 needed to end the September/November downtrend

For more click on FXBUZ

• Bitcoin leaps over $100k hurdle to hit record $101,626

• Unlocks potential for further gains, as risk-on persists

• Fresh BTC rally cued by Trump pick for SEC head nL2N3N50W5

• Adds to pro-crypto stance by US president-elect nL2N3N602C

• Wall St rallied o/n with bets on Fed rate cut in Dec

• USD slid on Wed with pullback in UST yields; 10y last 4.195%

• For more click on FXBUZ

• AUD/USD offered in Asia as traders boost bets on RBA April rate reduction

• 25 bps RBA rate cut fully priced in now for April from May earlier

• Odds of February cut at 51% from 27% before GDP disappointment on Wednesday

• Downside limited as U.S. yields decline as Fed Dec rate cut odds rise

• Focus moves to US NFP Friday and RBA rate decision Tuesday

• Australia goods trade surplus widens to A$5.95 bln in Oct as exports rise

• Strong support at 0.6400-05, clear break opens 0.6348-62

• Resistance 0.6440-45, 0.6475-80; Asia range 0.6422-0.6434

• For more click on FXBUZ

• +0.05% after closing unchanged with the U.S. dollar also steady

• French lawmakers passed a no-confidence vote against the government

• ECB's President Lagarde cautious on the medium-term EZ economic outlook

• Charts - daily momentum studies edge higher as 21-day Bolli bands contract

• 5, 10 & 21-DMAs coil, weekly moving averages fall - a modest bearish setup

• 1.0561 21 DMA then the 1.0610 recent range top is pivotal resistance

• Last week's 1.0425 base and the November 1.0331 low are initial supports

• 1.0500 1.198BLN 1.0505 650 mln and 1.0525 1.140BLN strikes for December 5th

  For more click on FXBUZ

Synopsis:

Danske Bank anticipates a bearish trajectory for EUR/CHF, driven by narrowing rate differentials and Switzerland's strong fundamentals, forecasting the pair to decline to 0.91 in the coming months.

Key Points:

• Swiss Inflation Print:
  • November inflation data met expectations, with headline inflation at 0.7% y/y and core inflation at 0.9% y/y.
  • Inflation remains on track to undershoot the SNB’s Q4 forecast of 1.0%.
• Monetary Policy Outlook:
  • Markets marginally favor a 50bp SNB rate cut for December (39bp priced).
  • Real effective CHF developments will heavily influence SNB decisions, as imported inflation remains a key focus.
• EUR/CHF Drivers:
  • Rate differentials are expected to narrow over the coming year, creating a sustainable headwind for EUR/CHF.
  • Strong Swiss fundamentals continue to support CHF strength against the EUR.

Conclusion:

Danske maintains a bearish stance on EUR/CHF, forecasting the pair to decline to 0.91 in the months ahead, as narrowing rate differentials and robust Swiss fundamentals exert downward pressure.

• AUD/USD opens 0.8% down Thu but off Wed low as lower U.S. yields underpin

• Supported as Powell says little to alter expectations of Dec Fed rate cut

• Powell upbeat on economy, says Fed can afford to be a little more cautious

• Higher yuan, stable KRW, higher iron ore prices also lift AUD mood

• Rallies likely to be capped as weak Australia Q3 GDP fuels RBA rate cut bets

• 25 bps Apr RBA cut fully priced; odds of Feb cut at 55% from 27% before GDP

• Aus trade data Thu but focus moves to US NFP Fri and RBA rate decision Tue

• Strong support at 0.6400-05, clear break opens 0.6347-62

• Resistance 0.6440-50, 0.6475-80; Wednesday range 0.6399-0.6488

• For more click on FXBUZ

• GBP$ firm into NY close, +0.34% at 1.2713, Wednesday range 1.2722-1.2630

• BoE's Bailey sticks to 'gradual' script for rate cuts nL5N3N50HD

• UST yields tick lower after Fed's Musalem talks lower rates

• Powell: Unemployment still very low, making progress on inflation

• Post-election Trump trade USD bid tapers ahead of Thursday IJC, Friday NFP

• A chance for sterling bulls before year-end doldrums nL2N3N50LC

• U.S.-UK rate spread on parallel path into YE 2025; GBP dip overdone

• GBP$ res 1.2722 Wednesday high, 1.2761 50% of 1.3046-1.2475, 1.2820- 200-DMA

• Supt 1.2688 rising 10-HMA, 1.2630 Wednesday low, 1.2569 the Nov. 27 low

• NY opened near 1.0505 after EUR/USD slid overnight, drop extended early

• 1.0472 hit on EBS with help from rising US yields US2YT=RR, US$ buying

• Yields, US$ fell after below estimate US Nov. ISM non-manufacturing PMI

• EUR/USD rallied & turned positive, traded above 1.0540 in NY's afternoon

• USD/CNH drop & gold XAU=, equity ESv1 rallies helped lift EUR/USD

• Pair neared 1.0520 while Fed's Powell was interviewed, was up only +0.12%

• Techs are mixed; daily RSI rising & monthly falling, pair below 5- & 21-DMA

• US weekly jobless claims, Oct. int'l trade are data risks in NY Wednesday

• For more click on FXBUZ

Synopsis:

MUFG expects the euro to remain under pressure in 2025, driven by anticipated U.S. trade policies and geopolitical tensions, with EUR/USD potentially testing parity before staging a modest recovery.

Key Points:

• Election Impact: The euro fell sharply following Donald Trump’s election victory, with markets bracing for aggressive trade, immigration, and fiscal policies.
• Tariff Risks: U.S. trade tariff actions are expected to dominate FX dynamics in early 2025, with the euro particularly vulnerable given the euro-zone’s significant trade surplus with the U.S.
  • The U.S.-euro-zone trade deficit widened from $158bn in 2019 to $196bn by September 2024.
• Geopolitical Pressures:
  • Trump may leverage the euro-zone’s underperformance on NATO defense spending targets as additional justification for tough trade measures. Of eight NATO countries below the 2% spending threshold, seven are in the euro-zone.
• Economic Divergence: Anticipated policies could further widen growth and monetary policy differentials between the U.S. and euro-zone, pressuring EUR/USD lower.

Conclusion:

MUFG forecasts that EUR/USD could test parity in 2025 due to aggressive U.S. trade actions and geopolitical strains. However, a modest recovery is expected later in the year as markets adjust to the new policy environment.

• Modest pullback in USD/CHF puts focus on key support at the 200DMA (0.8824)

• Further support sits at 0.88. Close below would be a concern for longs

• As noted previously, Swiss CPI keeps alive the risk of a larger SNB cut

• In turn, the trade leading into SNB is likely a weaker franc

• That said, incoming U.S. data (NFP and CPI) is a clear risk for USD/CHF

• Topside surprises could see 0.8950-0.90 tested

• While a miss could see the pair at 0.8775 (U.S. election swing high)

For more click on FXBUZ

Synopsis:

Bank of America’s quant analysis indicates that EUR/USD’s bearish momentum, highlighted by a recent technical "death-cross" signal, is expected to persist into mid-2025. Historical patterns suggest further downside despite the pair's already significant depreciation since late September.

Key Points:

• Technical "Death-Cross" Formation:

  • A bearish "death-cross" signal was confirmed in late November, marking a continuation of the downtrend in EUR/USD.

• Historical Trend Analysis:

  • EUR/USD tends to be a trend-following pair within G10 FX, meaning momentum often persists rather than reverting to mean levels.
  • When EUR/USD has weakened by 6-7% over an eight-week period, as it has now, the downtrend historically extends.
  • A 26-week horizon after such a selloff typically sees the highest down ratio, with EUR/USD showing a median further loss of 1.8% from current levels.

• Implications for 2025:

  • Quant analysis indicates that the bearish momentum could persist until mid-2025.
  • Until there is a clear reversal, EUR/USD should be approached with a bearish bias.

Conclusion:

BofA's quantitative analysis suggests that EUR/USD's recent selloff is unlikely to reverse in the short term. The technical "death-cross" and historical patterns point to further declines, with the current downtrend potentially lasting into mid-2025. Investors are advised to maintain a bearish outlook on EUR/USD.

The fading dollar bid may present an opportunity for sterling bulls to push through resistance at the falling 21-DMA, which has capped it in recent days, and potentially mount an assault on the 200-DMA at 1.2820.

Rate differentials with the U.S. don't justify the degree of recent sterling selling and short positions against the pound might grow nervous as the illiquid period surrounding year-end approaches.

Traders will look to Friday's U.S. payrolls report and Dec.
11 CPI data for clues about the Fed's policy path, which could lead to position adjustments before the FOMC's Dec.
18 meeting, after which volumes are likely to diminish.

There may also be an opportunity, for those bold enough, to reenter long sterling positions after bulls were drubbed in the wake of the U.S. election.

GBP net spec positioning has dropped to +21.4k contracts, its lowest level since May 28.
While Fed rate cut expectations have diminished considerably since May, the U.S. central bank is expected to be slightly more dovish than the BoE in early 2025, which may help boost GBP/USD.

A close above the falling 21-DMA would put 1.2761, the 50% Fib of 1.3046-1.2475, in focus.
Above there, the 200-DMA and early-November highs above 1.30 may become levels to watch.

For more click on FXBUZ

Synopsis:

Credit Agricole recommends selling EUR/GBP on rallies, citing the GBP's transformation into a higher-yielding, safe haven proxy relative to the EUR. They anticipate continued GBP outperformance in 2025 due to political and economic stability in the UK compared to the Eurozone.

Key Points:

• GBP's New Role:

  • The GBP is increasingly viewed as a higher-yielding, safe haven proxy rather than a higher-beta alternative to the EUR.
  • This shift is reflected in the widening gap between UK and French 5Y Sovereign CDS spreads, which shows increased investor preference for the GBP during both risk-on and risk-off periods.

• Drivers of GBP Outperformance:

  • Political Stability: The UK is expected to maintain political stability, while political risks could rise in the Eurozone.
  • Economic Resilience:
    • The UK economy is less vulnerable to potential new US tariffs, which could weigh more heavily on the Eurozone in 2025.
    • UK domestic demand has been more responsive to recent BoE easing, supporting the economy.
  • Monetary Policy Expectations: Market expectations suggest the BoE will need a less aggressive easing cycle than the ECB to sustain growth, lending additional support to the GBP.

Conclusion:

Credit Agricole identifies selling EUR/GBP on rallies as a top trade for 2025. The GBP’s newfound status as a higher-yielding safe haven, coupled with the UK's relative political and economic stability, sets the stage for continued outperformance against the EUR.