• 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.

The dollar index rose for a ninth day amid firmer long-term Treasury yields after the U.S. inflation data and haven currency demand as risk appetite waned.

U.S.
consumer prices increased slightly more than forecast in September, but the annual CPI increase slowed to 2.4%.

Weekly jobless claims were up 258K, the highest level since early August 2023 amid weather and strike distortions.

Atlanta Federal Reserve Bank President Raphael Bostic said he would be "totally comfortable" skipping an interest-rate cut at the November meeting amid "choppiness" in recent data.

Federal Reserve Bank of New York President John Williams said he expects more rate cuts lie ahead as inflation pressures continue to moderate.

Chicago Federal Reserve Bank Austan Goolsbee, in a CNBC interview, said he sees a series of interest-rate cuts over the next year to year and a half.

UK finance minister Rachel Reeves is considering raising the rate of capital gains tax to as high as 39%, the Guardian reports.

Bank of Mexico board members expect that easing inflation will allow for further cuts, September meeting minutes show.

The Canadian dollar fell for a second day on rising Bank of Canada rate cut expectations and after TD Bank became the largest bank in U.S. history to plead guilty to violating a federal law aimed at preventing money laundering, and agreed to pay $3 billion in penalties.

Oil prices jumped about 4% on Thursday on a spike in U.S. fuel use before Hurricane Milton, Middle East supply risks and signs that demand for energy could grow in the U.S. and China.

Treasury yields were mixed as the curve steepened.
The 2s-10s curve was up about 5 basis points to +10.2bp.

The S&P 500 fell 0.27% amid weakness in industrials.

Gold rose 0.65% amid, helped by lower Treasury 2-year yields

Copper was up 1.02% on hopes China would announce more stimulus when it details its fiscal package Saturday

Heading toward the close: EUR/USD -0.18%, USD/JPY -0.32%, GBP/USD -0.22%, AUD/USD +0.19%, DXY +0.06%, EUR/JPY -0.52%, GBP/JPY -0.54%, AUD/JPY -0.15%.

For more click on FXBUZ

• NY opened near 0.6725 after 0.6743 traded overnight, pair fell initially

• Yields US2YT=RR, US$ firmed after Sept. CPI and weekly claims reports

• AUD/USD hit 0.6702 due to CPI but claims helped pair trade to 0.6743

• Pair then traded within 0.6710/40, sat near 0.6730 late, was up +0.17%

• Softer US yields, gold XAU= & copper HGv1 gains limited the downside

• USD/CNH rally above 7.0900, equity ESv1 losses helped cap the topside

• A daily doji candle formed & the pair held above a key Fibo and 55-DMA

• Techs send mixed signals; daily RSI rising but monthly RSI is falling

• Pair traded below the 10- & 21-DMAs but above the 55-DMA, daily cloud

• US Sept. PPI, Oct. U of Michigan & Fed speakers are risks for Friday

• For more click on FXBUZ

Synopsis:

Goldman Sachs revises its outlook for the Swiss National Bank (SNB), anticipating two additional rate cuts in the coming months.

Key Points:

• Projected Rate Cuts:
  • Goldman Sachs’ economists now expect the SNB to implement two further 25 basis point cuts at the December and March meetings.
• SNB's Tools for Managing CHF Appreciation:
  • The SNB has various tools at its disposal, including policy easing and foreign exchange intervention, to manage the appreciation of the Swiss franc (CHF). This was recently highlighted by the new SNB Chairman, Schlegel.
• Limitations on SNB Actions:
  • Despite having mechanisms to stem CHF appreciation, the SNB faces constraints due to less room to cut rates compared to its peers. This limitation may affect the effectiveness of their measures, especially if geopolitical tensions continue to escalate.

Conclusion:

Goldman Sachs anticipates additional rate cuts from the SNB as a response to economic conditions, while acknowledging the challenges posed by potential geopolitical instability and limited policy maneuverability.

The move higher in USD/JPY came to a halt during Thursday’s session as the pair slipped back below 149.
However, while the surge in U.S. jobless claims and a hawkish speech by Bank of Japan Deputy Governor, Ryozo Himino aided the pullback in USD/JPY, with U.S. yields remaining firm – the U.S 10-year yield trades at 4.1% – topside risks are likely to persist for the pair.

Technically, resistance at 149.32-40, which marks the mid-August highs is a hurdle that bulls will look to target.
A close above could create further momentum to breach 150, which would then potentially open the door to the 200DMA at 151.54.

On the BoJ, this is largely playing second fiddle to the increased focus on the U.S. Presidential election and the move higher in U.S. Treasury yields.

Though BoJ Deputy Governor Ryozo Himino largely reiterated his hawkish stance, the potential timing for the next hike remains unchanged.
The October meeting has been taken off the table amid the calendar conflict with Japan’s lower house elections at the end of the month.
The next conceivable live meeting is December, where market pricing attaches a 33% probability.

That said, the BoJ trade is unlikely to garner a great deal of attention until after the U.S. election.

For more click on FXBUZ

Synopsis:

Bank of America analyzes FX flows and positioning at the end of Q3, highlighting a neutral stance on the USD while investors favored long positions in AUD and maintained shorts in CAD, CHF, and SEK.

Key Points:

• Market Positioning:

  • At the end of Q3, the market was neutral on USD, long on AUD, and short on CAD, CHF, and SEK, with other positions remaining relatively light.

• Investor Behavior:

  • Investors reduced their long positions in USD while increasing holdings in JPY, EUR, and GBP. They also sold NZD and continued to decrease their NOK longs.

• Hedge Fund Strategies:

  • Hedge Funds concluded Q3 long on Scandies, USD, and AUD while holding short positions in CAD, NZD, and GBP. They sold USD, CAD, and GBP, while buying EUR, CHF, and NZD.

• Real Money Positioning:

  • Real Money clients ended long on GBP and AUD, and short on NZD, Scandies, and CHF. They were less aggressive than Hedge Funds, with lighter net flows.

• Options Market Dynamics:

  • In the options market, investors were significantly long on AUD and EUR, and heavily short on JPY and SEK.

Conclusion:

Overall, the positioning data for Q3 reflects a shift in market sentiment, with a neutral stance on the USD and strong preferences for AUD, while CAD, CHF, and SEK faced short positions. Hedge Funds exhibited more aggressive strategies compared to Real Money clients, who maintained a more cautious approach.

• Speedy USD/JPY rise has raised speculation about intervention

• Traders were short $5 billion versus JPY

• Many sold low following the plunge following July BOJ meeting

• Traders still short are almost certainly nursing losses

• Rather than fear intervention, specs would welcome it

• One reason USD struggling to rise - it's overbought nL1N3LM0K5

• USD/JPY should return to its uptrend and surpass 2024 peak nL1N3LM0B9

Synopsis:

Credit Agricole analyzes the recent USD rally, prompting discussions among FX investors about the potential resurgence of the 'King USD.' Factors contributing to this movement include a recovery in the currency's relative rate appeal, rising geopolitical tensions, and shifting political dynamics in the U.S.

Key Points:

• Relative Rate Appeal:

  • The USD's relative rate appeal has strengthened following unexpectedly robust September non-farm payrolls data. This has led markets to reduce their expectations for Fed rate cuts.

• Geopolitical Tensions:

  • Increasing tensions in the Middle East have reignited oil prices, tightening global conditions and negatively impacting risk sentiment, thereby enhancing the appeal of the USD as a safe-haven currency.

• Political Landscape:

  • The improving prospects for Donald Trump in the upcoming presidential race raise concerns about a potential resurgence of global trade tensions, further supporting the USD.

• Market Expectations:

  • Despite the recent rally, U.S. rate markets have already reduced their expectations for Fed rate cuts to under 50 basis points this year. Current pricing aligns with Credit Agricole's view, indicating that some positives related to the Fed are already factored into the USD's value.

• Future Outlook:

  • Additional positive surprises in U.S. economic data and further deterioration in global risk sentiment will be necessary for the USD to gain additional strength.

Conclusion:

Credit Agricole suggests that while the USD may continue to recover its status as 'King USD,' the currency's potential for further appreciation is contingent upon forthcoming positive economic data and shifts in global risk sentiment. The current market conditions suggest a cautious approach, as much of the positive sentiment is already priced in.

Synopsis:

CIBC analyzes the September US inflation data, highlighting persistent price pressures as both core and headline CPI figures exceeded expectations for the second consecutive month. The firm interprets these results as reinforcing the Federal Reserve's cautious approach, indicating that further aggressive rate cuts are unlikely in the near term despite a cooling labor market.

Key Points:

• Core CPI Growth:

  • Month-over-Month Increase: Core CPI rose by 0.3% MoM in September, slightly surpassing the consensus forecast.
  • Three-Month Annualized Rate: The three-month annualized core CPI increased to 3.1% as of September, reflecting sustained inflationary pressures.

• Headline CPI Performance:

  • Month-over-Month Increase: Headline CPI climbed by 0.2% MoM, also exceeding forecasters' predictions.
  • Year-over-Year Rates: Headline inflation decreased to 2.4% YoY, while core inflation edged up to 3.3% YoY.

• Drivers of Inflation:

  • Non-Housing Services and Core Goods: The upside surprise in inflation was driven by stronger prices in non-housing services and core goods, reversing several months of modest deflation in these sectors.
  • Shelter Inflation: Shelter inflation saw a decline after a spike in the previous month, offering a partial silver lining to the overall inflation picture.

• Implications for Federal Reserve Policy:

  • Fed's Stance: The persistent inflation data suggests that the Federal Reserve remains cautious and is not in a hurry to implement further rate cuts.
  • Labor Market Conditions: While the labor market is cooling, it is not weakening significantly enough to prompt aggressive policy easing.
  • Inflation Trends: Inflation continues to trend slightly above the Fed's target, supporting a measured approach to monetary policy adjustments.

Conclusion:

CIBC views the September US inflation report as indicative of ongoing price pressures, particularly within core inflation metrics. These findings support the Federal Reserve's cautious stance, suggesting that further aggressive rate cuts are unlikely in the immediate future. The cooling yet resilient labor market, combined with mixed inflation signals, underscores the Fed's balanced approach to maintaining economic stability while monitoring inflation trends.

• Dealers report 150.00 FX option barriers as next major hurdle nL1N3LM09K

• USD/JPY has peaked at 149.54, on Thursday in last Asia, before relapsing

• London has seen spot drop to 148.79, so far, according to EBS data

• Market seems jittery ahead of Sept U.S. CPI data due at 1230GMT

• EUR/JPY and USD/JPY continue to move in tandem with each other

• BOJ may not be as dovish as Ueda's cautious rhetoric suggests nL4N3LL0UO

• Himino: BOJ will hike if it has more confidence in forecasts nL1N3LM08Y

• Former FX diplomat: mkts 'extremely sensitive' to MP outlook nP8N3KZ0AG

• ECB rate cut expectations weigh on euro, with EUR/GBP down to 0.8360

• 0.8360 is lowest level since Monday (0.8352 was low that day)

• 68 of 75 economists polled by Reuters predict ECB rate cuts in Oct and Dec

• 0.8434 was last week's high, after GBP tanked on BoE chief's dovish guidance

• IFS says Labour govt may need to hike UK taxes by GBP 25 billion in budget

• Opposition Tory MPs raise risk of 'Big Dog' biting pound again nL1N3LM07P

• EUR/USD has breached the base of the thick daily cloud, now at 1.0934

• A daily close under the cloud would likely lead to a much bigger drop

• 1.0881 Fibo, a 76.4% retrce of 1.0778-1.1214 (EBS) rise, would be unmasked

• 14-day momentum remains negative, highlighting the bearish market structure

• We are looking to get short at 1.0975, which is ahead of recent daily highs

• EUR/USD Trader TGM2334. Previous update nL1N3LM07B

• Implied volatility gauges realised volatility risk for FX option pricing

• Risk reversals show which direction any FX volatility is more likely

• Price changes in risk reversals can be bellwether for FX directional risk

• Benchmark 1-month EUR/USD risk reversals warned of setback risk from 1.1200

• EUR put over call (downside vs upside strike) premium now highest since July

• Weaker than expected U.S. CPI data could see deeper EUR/USD declines

• Overnight expiry option implied volatility suggests tame volatility reaction

For more click on FXBUZ

• EUR/USD trades within the daily cloud, that now spans the 1.0934-1.1052

• As spot is trading under the 1.0980 Fibo, overall bias is bearish

• 1.0980 Fibo is a 38.2% retrace of the 1.0602-1.1214 (Apr-Sept) EBS rise

• There is scope for a break under the cloud base, likely soon

• Below the cloud would unmask 1.0908 Fibo, a 50% of same 1.0602-1.1214 gain

• Offer at 1.1005. EUR/USD Trader TGM2334. Previous update nL1N3LL088