• GBP/USD falls to 1.3542 as dollar short positions are squeezed

• 1.3542 is lowest level since June 24 (1.3531 was low that day)

• Early London high was 1.3647 - before higher gilt yields hurt pound

• FT-UK faces 'daunting' risks to public finances, OBR warns

• Penultimate PMQs before summer recess Wednesday. UK May GDP data due Friday

• 1.3563 (July 2 low) and 1.3576 (Monday low) are now cable resistance levels

GBPUSD

(Robert Howard is a Reuters market analyst. The views expressed are his own)

Synopsis:

ANZ remains convinced that USD/CAD will trend lower in the medium to long term, even if the pace is slow, supported by valuation metrics, diversification away from US assets by Canadian investors, and gradual shifts in positioning.

Key Points:

• Valuation Signals Undervaluation:
  • ANZ’s fair value for USD/CAD sits closer to 1.20, with 1.30 marking one standard deviation above FV.
  • Current levels remain significantly above fair value, suggesting room for a sustained move lower.

• Diversification Flows Support CAD:
  • Canadian pension funds and investors are diversifying away from US assets.
  • April TIC data showed nearly USD 58bn in net selling of US Treasuries by Canadian investors, likely a reaction to the April tariff announcement.

• Broader Crosses Could Lag:
  • CAD is likely to lag stronger G10 crosses like EUR and GBP due to its high beta to USD movements.
  • So while USD weakness helps CAD on the USD leg, CAD may not outperform on other crosses.

• Domestic Headwinds Remain:
  • Ongoing challenges for the Canadian economy and the potential for further BoC easing will temper the pace of CAD gains.

• Positioning Trends Support a Grind Lower:
  • CFTC non-commercial positioning shows a gradual shift toward net short USD/CAD, reinforcing the tactical bearish USD/CAD view.

Conclusion:

ANZ’s conviction is that USD/CAD will move lower “slowly but surely” as undervaluation, investor flows, and broader USD weakness align. However, given lingering domestic and policy risks, CAD’s performance on crosses may be more subdued — the main story remains a USD/CAD grind lower through H2 and into 2025.

Synopsis:

Morgan Stanley reiterates its USD bearish base case, but highlights that a supply-driven surge in oil prices is an important upside risk to the Dollar, potentially triggering a short squeeze in what remains a consensus short USD market.

Key Points:

• Supply-Side Oil Shock = Short Squeeze Risk:
  • A geopolitical supply shock that pushes oil prices sharply higher could lift the USD by ~2% or more, given crowded USD short positioning.
  • Near-term, this could limit investors’ appetite to add USD shorts or increase exposure to oil-sensitive FX pairs.

• Parallels with March 2022:
  • The market is increasingly trading FX based on terms-of-trade dynamics, similar to the reaction after the Russia-Ukraine war began in March 2022.
  • Historically, the DXY peaks and then weakens quickly after geopolitical escalations, implying that any USD rally driven by oil could be short-lived.

• Positive USD-Equity Correlation:
  • The strong correlation between USD and US equities may also cap any significant, sustained USD strength.

• Medium-Term Bearish USD Fundamentals Remain:
  • US rate convergence, hedging flows, and weaker relative growth still point to a weaker USD in the medium term.
  • MS sees a geopolitical-driven USD squeeze as an opportunity for USD bears to re-enter at better levels.

Conclusion:

Morgan Stanley argues that while higher oil prices are a real short-term risk to the bearish USD view, any USD strength on the back of an oil-driven short squeeze should be seen as an opportunity to fade and re-establish short positions, as fundamentals continue to favour a weaker dollar into 2025.

• AUD/USD dipped down to 0.6491 then rallied to 0.6559, NY opened near 0.6540

• Pair up +0.74% in early NY after RBA surprised investors by leaving rates unchanged

• Australian yields rallied sharply as investors had been expecting a rate cut

• AUD/JPY rally toward 95.80 & equity gains helped underpin AUD/USD

• Gold drop, USD/CNH bounce off lows & firm US yields helped limit AUD/USD gains

• Rising daily RSI, ,ong lower wick on July's candle gives longs some comfort
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

July 8 (Reuters) - The probability of AUD/USD rising through 0.66 for the first time since November 2024 has increased courtesy of Tuesday's interest rate surprise from the Reserve Bank of Australia.

The RBA opted to keep rates unchanged at 3.85%, when the consensus expectation was for a 25 basis-point cut.

AUD/USD jumped to 0.6559 following the RBA announcement to hold rates, with the ensuing retreat basing six pips shy of 0.6521, which was the high before the RBA decision.

Offers ahead of 0.66 capped AUD/USD appreciation last week, with 0.6590 marking the eight-month high on July 1.

Monday's CFTC data on FX positioning showed that the net AUD short remained hefty in the week ending July 1, at just over 70,000 contracts, after hitting a 12-week high of 72,562 contracts in the week ending June 24.

Stop-loss orders on some AUD/USD shorts are likely parked above 0.6600, which could help fuel gains if triggered.
AUDUSD

(Robert Howard is a Reuters market analyst. The views expressed are his own)

• EUR/USD has risen 1.0125 to 1.1830 and is holding near peak that rise

• While bets on a rise have grown, they are not a major restraint

• This bullish situation is likely to result in further gains

• Rise over 1.1745 - 78.6% 2021-22 slump - targets 2021 high at 1.2349

• The 1.2000 mark presents a big challenge before that target met

• 1.2000 is a huge psychological level and core to many strategies

• The 200-MMA - never broken is 1.2001 - 1.2016 is 38.% 2008-2022 drop

• The rally is already stretched above 1.1700 peak 20-month Bollingers

• Dollar drop is less impressive than euro's rise

•
EURUSD

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• AUD/USD jumped to 0.6559 in Asia after RBA unexpectedly kept rates unchanged

• Ensuing retreat based six pips shy of 0.6521 (high before RBA rate decision)

• 0.66 is key resistance level beyond 0.6559 (0.6590 was July 1, 8-month high)

• Monday's low was 0.6485, as Trump's tariff letters hurt risk-sensitive AUD

• Trump says August 1 tariff deadline is "firm, but not 100% firm"

• Australia PM Albanese confirms China visit as Beijing eyes trade deal review

AUDUSD

(Robert Howard is a Reuters market analyst. The views expressed are his own)

• Cable up to test 1.3646 (Monday's Ldn/NY session high) amid tariff deja vu

• Trump says August 1 tariff deadline is "firm, but not 100% firm"

• Offers expected pre-1.3690 if GBP/USD extends north (1.3681 was July 4 high)

• 1.3690 was low before July 2 PMQs - events at which spurred drop to 1.3563

• CFTC data: net GBP long fell for third consecutive week before July 2 PMQs

• Two more PMQs before summer recess. UK May GDP data due Friday; 0.1% f/c

GBPUSD

(Robert Howard is a Reuters market analyst. The views expressed are his own)

• AUD/USD gives back some gains, last 0.6535 from 0.6559

• Recoils away from Bollinger uptrend channel at 0.6560

• Kneejerk reaction to surprise RBA hold fades

• Markets had wholly priced in another 25 basis point cut

• But RBA's Bullock keeps rate cut hopes alive

• Affirms easing path, but says timing is of importance
AUD:

(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

• RBA surprised by leaving rates unchanged at 3.85%, need more information

• Traded up 0.35% before the RBA, +0.8% after, in a 0.6490-0.6559 range

• 0#AUDIRPR forecast a 91.69% chance of an RBA cut to 3.6% before the decision

• 0#AUDIRPR now prices a 64.62% chance of a 25pt cut to 3.6% in August

• Charts, mixed 5, 10 & 21-day moving averages, horizontal 21-day Bolli bands

• Daily momentum studies conflict - a neutral setup at familiar levels

• June 24th, 0.6456 low and the 0.6440 lower 21-day Bolli are initial support

• Resistance levels: yesterday's 0.6556 high, then the 0.6589 and 2025 top
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• EUR/USD off recent highs but still relatively buoyant, Asia 1.1708-47 EBS

• Follows push back to 1.1687 yesterday on USD demand, moves higher

• EUR/USD still holding near ascending daily Ichimoku tenkan today at 1.1742

• Holding below ascending 200-HMA at 1.1751, 1.1763-75 hourly Ichimoku cloud

• Massive option expiries today again to help contain spot action

• 1.1650-80 E1.6 bln, 1.1700 E2.5 bln, 1.1720-80 E1.7 bln, 1.1800-10 E1.1 bln

• EUR/GBP quiet but heavy, 0.8613-16, well below 0.8670 recent high July 2

• Some option expiries between 0.8630-35, at 0.8670 strikes today

• EUR/CHF up from recent lows but relatively heavy, Asia 0.9356-58

• Still holding near base of 0.9351-0.9427 daily Ichimoku cloud

• EUR/JPY higher still, 171.23 to 171.80 EBS, best since 181.85 on July 19 '24

• Up with daily Ichimoku tenkan since May 27, today at 170.13

• Related comments , , ,

• Also , , for more click on [FXBUZ]

EUR/USD:


EUR/USD nearby option expiries this week:


EUR/CHF:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

Synopsis:

Bank of America argues that the yen is not yet pricing in the potential fiscal or political risks related to Japan’s upcoming Upper House election on 20 July, but that could change in the coming days as projections emerge.

Key Points:

• Status Quo Assumption:
  • Markets assume the ruling coalition will maintain power because the opposition remains fragmented and poorly coordinated, which explains the lack of a risk premium in USD/JPY and implied vols.
  • Focus has been elsewhere — specifically on US tariffs and economic data, diverting attention from Japan’s domestic political calendar.

• Election Risk: Skewed to Yen Weakness:
  • BofA reiterates its earlier view that a surprise loss by the ruling coalition could increase fiscal policy uncertainty and raise volatility, with risks skewed to yen depreciation.
  • The Upper House result could renew focus on Japan’s fiscal sustainability, which has been under the spotlight since policy shifts toward monetary tightening began.

• Watch for Media Projections:
  • The election is officially announced today (July 3) and media projections could start emerging as early as this weekend.
  • If projections show a meaningful threat to the ruling coalition, the market could start to reprice risk, bringing election risk into USD/JPY positioning and JPY volatility.

Conclusion:

The JPY is not yet pricing election risk, but BofA warns that could change quickly as local polling coverage ramps up. A surprise shift in Japan’s domestic political outlook could add downside risks for the yen, especially if paired with fiscal uncertainty concerns.

• Up 0.25% with the U.S. dollar off 0.2% amid confusion on US tariff details

• US tariffs on Australia at a baseline of 10%, but there are many exceptions

• Business activity rebounded in June, NAB survey conditions +9, confidence +5

• Focus swings to the RBA rate decision- 0#AUDIRPR prices a 25pt cut at 92.99%

• Charts, mixed 5, 10 & 21-day moving averages, horizontal 21-day Bolli bands

• Daily momentum studies conflict - a neutral setup at familiar levels

• June 24th, 0.6456 low and the 0.6440 lower 21-day Bolli are initial support

• Resistance levels: yesterday's 0.6556 high, then the 0.6589 and 2025 top
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• +0.15% after closing off 0.35% - resilient with the U.S. dollar up 0.6%

• Trump on tariffs: August 1 deadline is firm, but he is open to other ideas

• Comments suggest that US tariffs will be an ongoing concern for markets

• With no UK data or scheduled BoE events, risk appetite & USD lead sterling

• Charts - 10, & 21-day moving averages rise, momentum studies crest/fall

• 21-day Bollinger bands rise - daily chart shows a modest topside bias

• Key supports: 1.3593 21-DMA held on the close, then last week's 1.3563 low

• Resistance levels: 1.3681 July 4th top, then 1.3787 2025 high on Tuesday
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• USD/JPY surged to 146.24 EBS yesterday, higher US tariffs to blame

• Trump to impose 25% tariffs on Japan, SoKorea from August 1

• USD/JPY already on slow grind up in anticipation of this news?

• 144.75-145.55 daily Ichimoku cloud pierced to the upside

• Spot to area of descending 100-DMA today at 145.94, resistance of sorts?

• Previous rally above 100-DMA rejected fast, case again this time?

• Resistance above likely at 146.60, site of $949 option expiries today

• Only other chunky expiries today between 145.00-20, $643 mln

• US yields higher ahead of supply, USD supportive, Treasury 10s @4.384%

• Related comments , , , also

• US markets , , ,
USD/JPY:


USD/JPY nearby option expiries this week:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• +0.25% after closing down 0.7% with the U.S. dollar up 0.6%

• EU avoids a US tariff letter, eyes concessions, EU sources say

• Good news on the EZ tariffs, but uncertainty on tariff roll-out caps risk

• Charts - neutral daily momentum studies, 21-day Bollinger bands rise

• 10 & 21-day moving averages climb - daily charts support further gains

• The first significant resistance is last week's 1.1830 2025 high

• Last week's 1.1708 low, then the 1.1617 21-DMA, are initial support

• A close below the 1.1619 21-DMA would end the May/July topside bias

• 1.1700 2.467 BLN are the only significant close July 8th strikes
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

• +0.05% after closing -0.95%, USD +0.6% on short covering - higher UST yields

• US ramps up trade war with letters - Japan, South Korea hit with 25% tariffs

• RBA is expected to cut rates today; could US tariff news keep them on hold?

• NAB business conditions, confidence lead data at 11.30 - unlikely to impact

• Charts, 5, 10 & 21-day moving averages conflict, neutral 21-day Bolli bands

• Mixed daily momentum studies fall - a neutral setup at familiar levels

• June 24th, 0.6456 low then the 0.6440 lower 21-day Bolli are initial support

• Resistance levels: yesterday's 0.6556 high, then the 0.6589 and 2025 top
Andy

(Andrew Spencer is a Reuters market analyst. The views expressed are his own.)

Synopsis:

ANZ remains bullish on the euro, viewing EUR/USD dips as tactical buying opportunities even as the pair’s recent rally leaves it looking overbought in the short term.

Key Points:

• Rally Drivers:
  • EUR/USD extended its rally through late June into early July, breaching 1.18, supported by softer US macro data (notably weaker services and composite PMIs) and growing confidence in the ECB’s easing trajectory.
  • Speculative long positions in EUR/USD have increased sharply, with CFTC non-commercial reports showing a notable build-up.

• Eurozone Inflation Supports Dovish ECB:
  • June HICP came in below 2%, with core easing to ~2.1%; services inflation is showing signs of stabilisation as earlier repricing fades.
  • This gives the ECB room for one more rate cut in Q3, taking the terminal deposit rate to 1.75% by year-end.

• Short-Term Risks:
  • Momentum indicators like RSI are in overbought territory, raising the risk of a shallow positioning correction.
  • The threat of new US tariffs on European goods from 9 July could weigh on euro exports and test sentiment.

• Fiscal Factors:
  • Optimism around Germany’s budget boost is largely priced in, but implementation of increased fiscal spending remains a key support for medium-term euro strength.

Conclusion:

ANZ sees near-term consolidation below 1.18 as likely, but any dips should be viewed as opportunities to buy EUR/USD. The bank retains a positive 3- to 6-month outlook, expecting further upside once positioning resets and fresh euro area fiscal support comes into focus.

• GBP$ limps into NY afternoon, -0.29% at 1.3611; NorAm range 1.3646-1.3591

• Pair had rallied off o/n low 1.3576 as Trump delays tariff implementation to Aug 1

• Near-term Fed-BoE rate path symmetrical offers no benefit to either GBP or USD

• Celebrating sterling's stable foundations -- relatively speaking nL6N3T40FP

• UK Fiscal concerns balanced by softer Fed path in 2026, after Powell regime ends

• GBP$ res 1.3653 Monday high, 1.3674 rising 10-DMA, 1.3749 upper 30-d Bolli

• Supt 1.3576 Monday Europe low, 1.3563 July 2 low, 1.3533- 23.6% of 1.2712-1.3787

GBP Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

Synopsis:

ING expects the Reserve Bank of Australia to deliver a 25bp rate cut at this week’s July meeting — but sees this as fully priced in, meaning the immediate impact on AUD/USD should be limited.

Key Points:

• AUD Already Weakens on Trade Tensions:
  • The AUD fell nearly 0.9% overnight, driven by renewed trade tensions after President Trump warned of additional tariffs on countries aligning with “Anti-America policies” ahead of the BRICS summit.
  • The AUD remains the worst performing G10 currency YTD, weighed by both external and domestic factors.

• RBA Cut Expected, Not Excessively Dovish:
  • ING expects the RBA to cut the cash rate by 25bp, aligning with consensus.
  • The RBA is unlikely to sound excessively dovish, given that easing core inflation and weaker growth are already well-telegraphed.

• External Events in Focus:
  • Despite the RBA move being priced in, the AUD will remain sensitive to external drivers:
  – US trade deal developments
  – Potential shifts in Fed rhetoric before its July meeting
  – China’s Politburo meeting at month-end

Conclusion:

A 25bp RBA cut is unlikely to move AUD/USD significantly on its own, with external events continuing to be the main drivers for the AUD. ING expects AUD sentiment to remain fragile near-term as trade policy and global growth risks dominate.

• Ether hit a 3-session high of 2603.82, sellers emerged, Ether turned lower

• Ether traded down -0.18% into Europe's close, near its 2530.87 session low

• Daily RSI diverged on the high, daily gravestone doji formed, they may worry longs

• Monthly doji candles for June and July suggest the market is indecisive however

• Ether bulls likely need better risk sentiment for rally off April low to resume
eth


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Synopsis:

Goldman Sachs maintains its forecast for the RBA to cut the cash rate by 25bp at its July meeting, lowering it to 3.60%, a move that is now fully priced by markets. GS continues to see a dovish bias in the outlook, with risks skewed towards a deeper easing cycle than its base case.

Key Points:

• Base Case:
  • 25bp cut to 3.60% this week.
  • Additional back-to-back cut in August and a final cut in November to reach a terminal rate of 3.10%.
  • Risks tilt towards an even deeper easing cycle, given the soft GDP data and slowing private demand.

• Statement Expectations:
  • Final section of the statement likely to remain little changed, still highlighting inflation around target and policy remaining “somewhat restrictive”.
  • Likely removal of references to a “severe downside scenario” since there is no updated Statement on Monetary Policy forecast round.
  • Expectation for incrementally more dovish tone on private demand, but the labour market still described as “tight”.

• Governor Bullock’s Press Conference:
  • Expected to lean dovish, signalling the Board is open to further cuts depending on inflation and other evolving risks.
  • Unlikely to push back against market pricing for additional easing — instead, likely to keep forward guidance vague, citing elevated uncertainty in the outlook.

Conclusion:

Goldman sees the RBA’s message as clearly dovish, with the July cut fully priced and the door wide open for more easing in H2 if inflation and growth data disappoint. They maintain a gradual easing bias, but flag that risks remain tilted towards a deeper cycle if domestic demand continues to weaken.

• EUR/GBP tests 0.8607 after extending south from 0.8642 (European am high)

• 0.8607 was July 3 low. There is an 0.8610 option expiry for the NY cut

• Expiries can exert magnetism over FX rates, re: option-related flow

• 0.8670 was 11-week high for EUR/GBP on July 2, as gilt yields spiked

• July 2 spike in gilt yields was spurred by the tears from Reeves during PMQs

• UK May GDP data due on Friday: 0.1% growth forecast after 0.3% fall in April

EURGBP

(Robert Howard is a Reuters market analyst. The views expressed are his own)

Synopsis:

Morgan Stanley reaffirms a super bullish view on the Canadian dollar, expecting USD/CAD to decline into the low 1.30s over the next few quarters. Diverging monetary policy paths, positive yield differentials, and supportive reforms are seen driving CAD strength, despite headwinds from oil and immigration dynamics.

Key Points:

• Fed vs. BoC Policy Divergence:
  • The Fed is seen more inclined to cut rates than the Bank of Canada, with dovish signals from Bowman, Waller, and Powell boosting market pricing for Fed easing.
  • This relative policy stance should widen yield differentials in Canada’s favor.

• US-Canada Economic Agreement Tailwind:
  • Prospects for a new US-Canada economic and security agreement could reduce tariff-related growth risks and improve the BoC’s growth outlook.

• Long-Term Structural Support:
  • Despite global concerns about a shift away from oil and immigration challenges, reforms like the One Canadian Economy Act are expected to lift productivity, underpinning CAD resilience in the medium term.

• Energy and Immigration Caveats:
  • Morgan Stanley acknowledges that energy market dynamics and immigration flows may weigh on Canadian growth next year, but see these as manageable.

Conclusion:

Morgan Stanley expects USD/CAD to move toward the low 1.30s, supported by policy divergence, yield differentials, and structural reforms. While CAD may underperform some other G10 currencies due to oil and immigration factors, the team remains super bullish on the currency’s relative strength vs. the USD over the coming quarters.