• $IDX -0.98%, USD spec long -1.11bn in Jan 15-21 period on JPY, CAD, AUD buys

• Trump seen lass draconian on tariffs & talk of lower yields weighs on USD

• EUR$ +1.17% in period; specs -2.1k contracts now -62.5k; ECB cut upcoming

• $JPY -1.53%; specs +14.7k contracts now -14.7k; runup to BoJ hike lifts yen

• GBP$ +1.19%, specs -8.7k contracts now -8.3k; fiscal, dovish concerns weigh

• $CAD -0.2%, specs +16.4k contracts; reduced Trump tariff few lifted CAD

• AUD$ +1.26%, specs +6.3k; bottom-fishers, lower tariff view boosts AUD

Majors w/IMM Performance Chart:


IMM Position table:

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

• NY opened near 1.0485 after pair rallied sharply overnight

• Pair fell to 1.0464 on EBS in early trading but buyers emerged

• Yields , US$ fell after Jan. S&P Global PMI, U of Mich data

• German-US spreads tightened& USD/CNH fell below 7.2400

• EUR/USD rallied, traded 1.05215, hit a 1-month high before dipping

• Pair sat near 1.0505 late in the day, traded up +0.84%

• Rally above 5- & 21-DMAs, daily cloud base gives techs a bullish lean

• Rising RSIs, monthly bull hammer reinforce bullish tech signals

• Fed meeting, US Dec. PCE & Q4 GDP and ECB meeting are key risks next week
eurusd

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

Synopsis:

Credit Agricole anticipates that next week’s ECB meeting will deliver a 25bp rate cut, consistent with market expectations. However, potential divergence among policymakers on the nominal neutral rate (r*) could lead to a slightly hawkish surprise in the central bank's guidance.

Key Points:

1. Baseline Expectations:

   • The ECB is widely expected to cut all policy rates by 25bp at the January meeting.
   • Policymakers are likely to signal further rate reductions in the coming months.

2. Diverging Views on Neutral Rate (r):*

   • There is uncertainty among Governing Council members regarding the neutral rate's level.
   • Dovish policymakers estimate r* at around 2% or lower, advocating for a more aggressive easing path.
   • Less dovish members see r* closer to 2.25%, supporting a more cautious approach.

3. Potential Slight Hawkish Surprise:

   • If the less dovish view (2.25% r*) dominates the ECB’s outlook, the rate guidance may appear less aggressive than expected.
   • This could signal a shorter or shallower easing cycle, surprising markets positioned for extended rate cuts.

Conclusion:

While a 25bp rate cut is the likely outcome, any emphasis on a higher r* and a more cautious easing trajectory could deliver a slightly hawkish surprise next week. Markets should closely monitor the tone of the ECB’s forward guidance for clues on the Governing Council’s broader policy stance.

(Updates)

• Shares of gold miners jump as bullion prices climb over 1%, closing in on its all-time-high hit in October [GOL/]

• Spot gold up 0.9% at $2,778.03/ounce; prices, which have added 2.9% so far this week, are just $5.63 away from the record high of $2,790.15 hit on Oct. 31

• Gold prices rose as a weakening U.S. dollar on President Donald Trump's push for lower rates and tariff uncertainty drove the metal towards its fourth straight weekly rise

• Top miners Newmont and Barrick Gold each up ~1%

• U.S.-listed shares of South African miners Gold Fields

up 4.6%, Harmony Gold rises 4.3%, AngloGold Ashanti up 1.1%, Sibanye Stillwater rises 5.2%

• Shares of Canadian miners Agnico Eagle Mines and Kinross Gold both up marginally

(Reporting by Pooja Menon in Bengaluru)

Synopsis:

MUFG views the recent USD weakness as temporary, driven by reduced fears over aggressive tariff plans by President Trump. However, they expect the narrative to shift as tariff risks resurface and the FOMC maintains a cautious stance on rate cuts.

Key Points:

1. Recent USD Weakness:

   • The USD has softened amid reduced fears of immediate, aggressive tariffs.
   • President Trump has signaled a preference to avoid tariffs but maintained the threat of 10% tariffs on China and 25% tariffs on Canada and Mexico.

2. Near-Term Tariff Risks:

   • Next week will be critical for market clarity on Trump's tariff approach.
   • MUFG anticipates that by late January, financial markets may refocus on imminent tariff implementation, potentially driving renewed USD strength.

3. FOMC Outlook:

   • The Federal Reserve is likely to signal caution on further rate cuts.
   • Resilient US economic data supports the Fed’s decision to maintain policy stability, providing additional support for the USD.

Conclusion:

MUFG sees the recent USD pullback as a temporary correction driven by profit-taking in a crowded long dollar trade. They remain unconvinced that this leg lower will be sustained, especially with tariff risks and a cautious Fed likely to support the greenback in the near term.

GBP/USD is poised to rally further if U.S. President Donald Trump rhetoric about lower U.S. rates and a softer approach to tariffs materialize. Sterling rose above key resistance at the 30-DMA near 1.2429 in European trading and faces further obstacles at 1.2455, the 50% Fib of the December-January dip from 1.2811 to 1.2100. A close above 1.2455 could shift momentum to bulls and put the 55-DMA at 1.2545 and daily cloud base at 1.2637 in focus. Potential hazards for GBP/USD include the Fed's rate decision on Jan. 29 and BoE's on Feb. 6. Rate markets are discounting a hold by the Fed and a 80% chance of a 25bp BoE cut. Traders will parse post-decision policymaker comments for clues about the future. Though Trump has said he will demand immediate interest rate drops and expects the Fed to listen, markets are likely to position for the Fed to remain data-dependent, focusing on U.S. inflation. However, headline risk remains acute.
GBP Chart:

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

Synopsis:

BofA expects the ECB to cut all three policy rates by 25bp at next week's meeting, maintaining the December guidance. While the cuts are largely agreed upon, the press conference may focus on risks tied to US policy spillovers, the recent euro movement, and energy prices.

Key Points:

1. Rate Cuts Expected:

   • The ECB is expected to cut rates by 25bp across the board.
   • The neutral rate of 2.5% is the target for most policymakers, including hawks.
   • The first two rate cuts appear almost certain, with subsequent moves dependent on data.
   • BofA maintains that economic conditions may push the terminal rate to 1.5% or lower.

2. Press Conference Dynamics:

   • Focus likely on US policy spillovers, tariff impacts, and recent euro and energy price moves.
   • The ECB may defer concrete evaluations to the March forecast exercise.
   • Expect acknowledgment of uncertainties around tariffs and a measured approach to energy price shocks, emphasizing their differing impacts.

3. Inflation Risks:

   • The ECB might highlight that risks to US inflation from tariffs may not necessarily spill over into the Eurozone.
   • The willingness to “look through” energy price moves may reflect initial conditions in the Euro area.

Conclusion:

BofA expects a relatively straightforward meeting with the ECB cutting rates by 25bp and reiterating December's guidance. However, the press conference may provide insights into how the ECB views external risks, including US tariffs, energy prices, and currency developments, while likely deferring concrete assessments to March.

Synopsis:

ANZ sees limited upside for the EUR/USD and considers any move above 1.05 as a good opportunity to re-enter short positions. Growth risks and diverging monetary policies between the euro area and the US continue to weigh on the euro.

Key Points:

1. Growth Risks in the Eurozone:

   • Germany’s ZEW survey indicates persistent economic pessimism, with subdued current conditions and declining future growth expectations.
   • PMIs and Q4 GDP figures this week are likely to underscore the euro area’s economic vulnerabilities, especially if there’s a stark contrast with US data.

2. Yield Spread Limitations:

   • While EUR/USD has diverged somewhat from yield spreads due to tariff risks, the divergence is marginal and points to limited upside for the EUR.

3. Central Bank Divergences:

   • Differences in FOMC and ECB messaging during upcoming central bank meetings may further highlight monetary policy contrasts, capping EUR/USD gains.

4. Positioning Normalization:

   • While the pair could consolidate as positioning normalizes, upside moves are seen as opportunities for shorts, especially above the 1.05 level.

Conclusion:

ANZ remains bearish on the euro near-term, citing weak euro area growth prospects and policy divergences with the US. They recommend re-entering outright short EUR/USD positions on any move above 1.05.

Jan 24 (Reuters) - Chart 1: USD/CAD short-run bias remains higher leading into Feb 1 U.S. President Donald Trump appears to have taken a softer tone towards China regarding tariffs, though the same cannot be said for Canada and Mexico. The president has reiterated his threat that he could impose 25% tariffs on both countries as soon as Feb 1. In turn, the Canadian dollar has taken the threat in its stride as USD/CAD pulls back from recent highs. The looming threat of tariffs should keep the pair underpinned in the short-run and much how USD/CAD reacted to the initial threat in late November, the pair has held the Trump reaction level at 1.43. Chart 2: BoJ hiked delivered but U.S. yields remain the key driver for USD/JPY The Bank of Japan delivered a well telegraphed rate hike at its January meeting, taking the key policy rate to 0.5% from 0.25% – now at the highest level since 2008. However, given the plethora of reports pointing towards said outcome, the impact on the yen was muted. With the clearing of BoJ event risk, USD/JPY should predominantly take its cue from the direction of U.S. yields, as has been the case in recent months. Chart 3: Dollar at risk should crowded longs lack patience The biggest challenge for dollar bulls in the short-run is positioning. The last few months have seen a significant increase in dollar exposure and rightly so given the prevailing narrative. However, that positioning has become crowded – net longs sit at the highest level since November 2015 – and with the avoidance of shock-and-awe policies such as day one tariffs under Trump, some of that tariff risk premium embedded in the dollar has been unwound. FX markets are in limbo, which leaves dollar vulnerable to a cleansing of positions. Though it is difficult to forcefully lean against the dollar, the more time passes without aggressive tariffs, the more likely it is that the dollar will be exposed to positioning squeezes.
USD/CAD hourly chart


USD positioning


USDJPY vs yields

(Justin McQueen is a Reuters market analyst. The views expressed are his own.)

• FX Option implied volatility slumped as Trump risk premiums pared this week

• Better risk sentiment/weaker USD help drive broader option premium decline

• Initial losses slowing but AUD/USD implied vols have more downside potential

• AUD/USD fair value historic/realised volatility is below implied volatility

• Post US election lows (Nov. 8) still a few ticks below current levels, too

• AUD/USD downside risk premium on 1-month risk reversal post election low 0.6
AUD/USD 1-month 25 delta risk reversal


AUD/USD implied volatility


AUD/USD implied vs historic/realised volatility

(Richard Pace is a Reuters market analyst. The views expressed are his own)

• EUR/USD rises to 1.0515 EBS above 1.0480 peak 20-day Bollinger bands

• Target for correction of downtrend is 1.0573

• Stop hunt above 1.05 may well be completed

• Reserve managers may use this opportunity to purchase dollars recently sold

• Still little clarity surrounding U.S. policies which will underpin USD

• It's vital to remember that few traders own dollars

•
EURUSD

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

• AUD/USD climbs to 0.6330 on USD selling as Trump goes easy on China

• Trump said he would rather not use tariffs against China

• 0.6330 is highest level since Dec 18 (0.6339 was high that day)

• The 0.6300 former resistance level is now a support point

• Offers pre-0.63 capped Thursday gains after Trump's Fed cut demand hurt USD

• There are big 0.6300 option expiries today, Monday and Tuesday

AUDUSD

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

• USD/JPY has broken under the 154.97 Fibo, on Tuesday and again Friday

• 154.97 Fibo is a 38.2% retrace of the 148.65 to 158.88 (Dec to Jan) EBS rise

• Spot could not hold the break on Tuesday, which is likely a bear trap

• If spot does not close under 154.97 Fibo, that would likely see big gains

• A "bear trap" is set when a market cannot hold under a broken level

• Bid now at 155.20. USD/JPY Trader

Daily Chart:

(Martin Miller is a Reuters market analyst. The views expressed are his own)

• Minor EUR/GBP pullback on the weekly chart and could close negatively

• We had been looking for better levels to enter a long

• A bull trade entered by 0.8433 for 0.8575 with an 0.8330 stop

• The 10-day MA has closed above the 200MA, bullish signal

• A risk of sideways action below the 0.8473 Jan. 20 five-month high

• On any deeper pullback a minimum adjustment level is at 0.8414

• EUR/GBP Trader EUR/GBP Trader: [page:2343]
EUR/GBP daily candle chart:

(Peter Stoneham is a Reuters market analyst. The views expressed are his own.)

• FX option strikes expire at 10-am New York/14.00 GMT on Friday January 24

• EUR/USD: 1.0350-60 (4.1BLN), 1.0375 (2.4BLN), 1.0400 (1.6BLN), 1.0440 (1BLN)

• 1.0450-55 (733M), 1.0475-80 (1.8BLN), 1.0490-1.0500 (1BLN)

• USD/CHF: 0.8925 (397M)

• GBP/USD: 1.2440 (360M). EUR/GBP: 0.8425 (300M)

• AUD/USD: 0.6250 (822M), 0.6300 (682M)

• USD/CAD: 1.4340 (623M), 1.4360 (784M), 1.4380-85 (2.3BLN), 1.4425-30 (720M)

• USD/JPY: 155.00 (505M), 155.50 (450M), 156.40-50 (1BLN)

• EUR/JPY: 165.00 (401M)

• Thursday's FX options wrap (Richard Pace is a Reuters market analyst. The views expressed are his own)

• USD/JPY down from an early Tokyo high of 156.40 to 155.01 post-Trump, BOJ

• News of possible Trump-China trade deal got things pair off high

• Seemingly more hawkish than thought BOJ 8-1 vote for hike followed

• USD/JPY low on JGB yield surge, 2s 0.699% to 0.725%, 10s 1.209% to 1.240%

• USD/JPY to area of 154.93 ascending 55-DMA, good support eyed in area

• Spike down to 154.78 Tuesday stopped at 55-DMA then

• $505 mln option expiries at 155.00 supportive? 155.50-60 $632 mln too

• USD/JPY cap now seen in place around 156.50, ahead of 157.00

• Wait now on for BOJ Gov Ueda presser, hints on what will transpire in March

• Related , on BOJ , for more click on [FXBUZ]

USD/JPY hourly:


BOJ hikes rates to 0.5%, highest since 2008:

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

• +0.2% in a 1.2351/1.2388 range - USD slipped on friendly Trump/Xi talks

• BOJ rate decision and upcoming Lunar New Year kept Asia quiet in FX majors

• Flash manufacturing and services PMIs will lead data risk in London

• Consumer confidence fell to -22 the lowest since late 2023: GfK survey

• Data continues the cautious consumer sentiment since the UK budget

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

• 5, 10 & 21-DMAs conflict - weeklies remain bearish - negative setup holds

• Monday's 1.2160 low, then the 1.2100 2025 base are initial major supports

• Close above the under pressure 1.2362 21-DMA would be positive for next week
Andy

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

• AUD/USD jumps 0.4% in Asia as Trump strikes a positive tone on China

• Trump says recent conversation with China's Xi was 'friendly'

• Says he would rather not have to use tariffs over China

• Thinks he could reach a trade deal with China

• Trump's more moderate tone on tariffs, views on oil, rates lift risk & AUD

• Australian markets closed Monday; Asia range 0.6280-0.6310

• Resistance 0.6320-25, 0.6340-45, support 0.6275-80, 0.6250-55
AUD:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

• USD/JPY climbing with hourly Ichimoku cloud, from 155.75 late NY to 156.27

• Asia early low 155.93, hourly cloud currently 155.74-156.27, spot near top

• Descending 200-HMA above cloud at 156.31, 55/100-HMA 156.13/155.98 in cloud

• Seems FX has already discounted a BOJ hike, Tokyo sees 95% hike probability

• Higher Japanese inflation data out earlier also argues for BOJ hike

• Related comment , also and
USD/JPY hourly:

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

• Flat after closing up 0.2% - resilient with the U.S. dollar off 0.1%

• UK's Reeves promises changes in March if needed to meet budget rules

• UK gilt yields have largely mirrored Treasury yields in recent weeks

• Consumer confidence fell to -22 the lowest since late 2023: GfK survey

• Flash manufacturing and services PMIs will lead data risk in London

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

• 5, 10 & 21-DMAs conflict - weeklies remain bearish - negative setup holds

• Monday's 1.2160 low, then the 1.2100 2025 base are initial major supports

• Close above the under pressure 1.2362 21-DMA would be positive for next week
Andy

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

• Steady after closing +0.05%, with the U.S. dollar down 0.1%

• EU is open to US energy, arm sales talks to stave off US tariffs

• Trump demands Fed cut rates, claims better monetary policy understanding

• Charts - positive daily momentum studies, horizontal 21-day Bollinger bands

• 5, 10 & 21-DMAs edge base/rise, weekly moving averages fall - no strong bias

• 1.0444 55-DMA, 1.0457 2025 top, 1.0468 upper 21-day Bolli first resistance

• 1.0344 21-day moving average and Monday's 1.0266 low are initial supports

• 1.0457 2025 top and 1.0468 upper 21-day Bollinger band will be resilient

• 1.0400 1.1610 BLN and 1.0440 975 mln - close Jan 24th strikes
Andy

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

Synopsis:

BNPP expects the Swiss Franc (CHF) to weaken further, with EUR/CHF projected to rise to 0.95 in Q1 2025, driven by a combination of monetary policy dynamics and market fundamentals.

Key Points:

1. Expensive Valuation and Rate Differentials:

   • CHF remains overvalued, and rate differentials are likely to weigh on the currency.
   • The Swiss National Bank (SNB) is unlikely to tolerate significant CHF strength, especially with negative imported inflation, which could prompt intervention as rates approach the zero lower bound.

2. Limited SNB Intervention (So Far):

   • Recent months suggest the SNB has not actively intervened in FX markets, but risks of intervention will increase if CHF strengthens further.

3. Factors Supporting CHF:

   • Switzerland’s wide current account surplus and the CHF's purchasing power parity (PPP) could provide a floor and limit EUR/CHF upside.

4. Geopolitical and Fiscal Drivers:

   • For EUR/CHF to rise significantly beyond 0.95, BNPP suggests either reduced geopolitical risks or a European fiscal policy response to address the region's growth challenges.

Conclusion:

BNPP anticipates a gradual weakening of CHF but highlights its structural support from Switzerland's external balance. EUR/CHF is forecasted at 0.95 for Q1 2025, with further gains hinging on improved risk sentiment or a more robust European fiscal response

• AUD/USD opens 0.2% higher as Trump comments spark guarded optimism

• Trump tells Davos he will demand lower interest rates, oil prices

• Trump says he expects Fed to listen to him on interest rates

• USD slips broadly on Trump's comments as US inflation fears subside a bit

• Trump's more moderate tone on tariffs, views on oil, rates lift risk & AUD

• AUD/JPY key as BOJ rate decision looms Fri with rate hike expected

• Australian markets closed Monday; Thursday range 0.62555-0.62995

• Resistance 0.6300-05, 0.6325, 0.6340-45, support 0.6250-55, 0.6230
AUD

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

Jan 23 (Reuters) - The dollar index slipped on Thursday and U.S. shares rose after President Donald Trump, via videoconference to business leaders at the World Economic Forum, called for lower oil prices and interest rates. Trump also said he would ask Saudi Arabia to help boost a planned U.S. investment package by $400 billion. EUR/USD tracked share prices higher after dipping briefly following Trump’s criticism of the European Union’s trade policy. Trump threatened tariffs on products not made in the United States. European Commission Executive Vice President Valdis Dombrovskis said the common area is open to discussing purchases of energy and arms from the United States to ward off tariffs. Euro gains slowed before reaching its 55-DMA of 1.0450 with the European Central Bank expected to lower policy rates when it convenes next week. Trump also said he wanted to meet Russian President Vladimir Putin soon to secure an end to the almost three-year-old war with Ukraine. Cable rose 0.3% and remains near the top of its post-inauguration range of 1.2160-1.2376. Gilt yield were steady before January PMI data on Friday. British finance minister Rachel Reeves told Reuters that she will announce changes if necessary in March to meet her fiscal rules. The yen edged higher ahead of Japan December CPI -- core forecast at 3.0% year-on-year -- and a highly-anticipated Bank of Japan rate hike on Friday. Focus is on policy guidance by Governor Kazuo Ueda's at the post-meeting briefing.

Treasury yields rose 0 to 7 basis points as the curve steepened. The 2s-10s curve was up about 5 basis points to +35.8bp.

The S&P 500 rose 0.22% on gains in healthcare and industrials.

Oil fell 1.1% following Trump comments about lowering prices.

Gold was little changed and copper rose 0.66% as the dollar eased.

Heading toward the close: EUR/USD +0.17%, USD/JPY -0.35%, GBP/USD +0.28%, AUD/USD +0.24%, DXY -0.11%, EUR/JPY -0.21%, GBP/JPY -0.02%, AUD/JPY -0.15%.(Editing by Burton Frierson Reporting by Robert Fullem)