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EUR / USD
GBP / USD
USD / JPY
USD / CAD
AUD / USD
NZD / USD
USD / CHF
AUD / JPY
AUD / NZD
EUR / CHF
EUR / GBP
EUR / JPY
GBP / JPY
By Martin Miller  —  Jul 22 - 02:40 AM
  • EUR/USD failed to sustain this week's break above 1.0934 Fibo, a "bull trap"

  • 1.0934 Fibo is a 61.8% retrace of the 1.1139-1.0602 (2023-2024) EBS drop

  • Usually a bull trap is a bearish sign, increasing the chance of a top

  • A bull trap is set when a market breaks above a level but then reverses

  • Good chance of a relapse back to the daily cloud that spans 1.0759-89

  • EUR/USD Trader TGM2334. Previous update nL1N3JA1CF

Source:
Refinitiv IFR Research/Market Commentary
By Peter Stoneham  —  Jul 22 - 02:30 AM
  • Gold had looked to $2500 after putting in a new $2484 record high Jul 17

  • Market factoring a U.S. rate cut this year cited: Sept in the frame

  • Three-day slide to $2393 put bull targets on hold: modest bid early Mon

  • Joe Biden's decision to withdraw from 2024 presidential race cited

  • Political uncertainty triggers hedging but only a modest move so far

  • On the pullback a 50% Fibo at $2389, off $2293-$2483 climb

  • Risk-on and risk-off factors may support demand for gold

    For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Richard Pace  —  Jul 22 - 02:00 AM
  • FX option strike expiries for 10-am New York/3-pm London - Monday July 22

  • EUR/USD: 1.0845-50 (1.1BLN), 1.0900 (496M) 1.0925 (616M), 1.0950 (918M)

  • EUR/CHF: 0.9650 (272M), 0.9700-10 (1.1BLN)

  • GBP/USD: 1.2900 (200M), 1.2930-40 (1.2BLN)

  • EUR/GBP: 0.8375 (480M), 0.8415 (400M), 0.8450 (432M), 0.8465-75 (925M)

  • AUD/USD: 0.6650-55 (757M), 0.6700 (1BLN). NZD/USD: 0.6095 (330M)

  • USD/CAD: 1.3575 (1.7BLN), 1.3700-10 (807M), 1.3805 (391M)

  • USD/JPY: 156.00 (531M), 157.30 (415M), 158.00 (2.6BLN), 158.45-50 (789M)

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  Jul 21 - 11:55 PM
  • GBP/USD up 0.1% in Asia but off early 1.2940 high hit on U.S. political news

  • News Biden had ended his failing reelection campaign caused an early blip

  • Analysts say Biden exit could spur Trump-trade unwind, divided govt eyed

  • USD regains ground as risk aversion hits Asia on China economy concerns

  • China cuts short and long-term rates by 10bps, taken as sign of weak economy

  • UK launches pensions system review aimed at boosting economic growth

  • U.S. inflation data key this week for Fed rate expectations

  • Asia range 1.2913-1.2940; support 1.2890-1.2900, resistance 1.2950, 1.3000

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  Jul 21 - 10:45 PM
  • AUD/USD down 0.25% as China sentiment deteriorates despite PBOC rate cuts

  • China cuts short and long-term rates by 10bps, taken as sign of weak economy

  • Sliding copper and iron prices on weak China demand weigh on AUD

  • Asia risk aversion adds to selling pressure; Shanghai -0.9%, ASX 200 -0.75%

  • U.S. political developments taken in stride; U.S. data key this week

  • Support at 0.6661-64, 61.8% of June-July rally & 55-DMA; break opens 0.6630

  • Resistance 0.6700-05, 0.6725-30; Asia range 0.6702-0.66625

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Ewen Chew  —  Jul 21 - 09:25 PM
  • GBP/USD gets a lift as USD slips on Biden news nL1N3JD061

  • Last 1.2927 after blipping up to 1.2940 from close 1.2911

  • Mon closing above 1.2945 engages Bollinger uptrend channel

  • Exit from presidential race tames Trump victory bets

  • US presidential election outcome looks more uncertain now

  • Bets on likely Trump win stoking inflation get pared back

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  Jul 21 - 08:00 PM
  • AUD/USD up 0.25% in Asia as markets react to U.S. political developments

  • President Joe Biden dropped his faltering reelection bid on Sunday

  • Biden's exit could spur Trump-trade unwind, divided government eyed

  • S&P E-Mini +0.3%, Treasury futures rise 3 ticks but uncertainty rules

  • AUD upside limited as China concerns, commodities selloff weigh

  • Copper, iron ore trend lower on China demand concerns, will cap AUD

  • China LPR, U.S political developments key Mon; US inflation data this week

  • AUD Friday range 0.6709-0.6681, Monday Asia range 0.6688-0.6702

  • Support 0.6675-80, 0.6650-55 resistance 0.6720-25, 0.6745-50

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Burton Frierson  —  Jul 19 - 03:10 PM

The dollar rose on Friday, strengthening further away from recent lows as markets puzzled over a tech outage that hamstrung industries ranging from travel to finance while investors also prepared for key data releases next week that will included the Fed's favorite inflation indicator.

While the tech issues emanating from a software update by global cybersecurity firm CrowdStrike enhanced the dollar's safe-haven appeal, investors will be looking to next Friday's PCE release to affirm the recent increase in betting on Fed interest rate cuts this year.

Though some rate cut exuberance has been tempered from this week's extremes, the futures market is still fully discounting two quarter-point reductions this year and a strong chance of a third.

By March, the market foresees 100bp of easing by the U.S. central bank.

U.S.
Treasury yields rose 4-6bp across maturities with the 2s-10s curve little changed around -27bp.

Though still inverted, the curve has steepened from a depth of -50bp in late June as markets priced in a greater chance of Donald Trump winning the November presidential election, with all of the fiscal, tax and trade policy ramifications that might entail.

The S&P 500 was down 0.59% by New York afternoon trade, deepening the sell-off from recent record highs driven by tech stocks and mixed earnings, while investors assessed the impact the cyber outage that knocked down CrowdStrike's shares.

WTI tumbled 3.19% as oil prices reacted to renewed hopes of a ceasefire in Gaza as well as the firmer dollar.

Copper was down 1.04%, falling for a fifth straight session that took it to its lowest level in three months on disquiet about a weak Chinese economy and the lack of stimulus announcements.

Gold slid 1.89% as the dollar gained and profit taking kicked in following bullion's all-time peak hit earlier this week, which was fueled by rising expectations of a U.S. interest rate cut in September.

Heading toward the close: EUR/USD -0.16%, USD/JPY +0.07%, GBP/USD -0.27%, AUD/USD -0.34%.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jul 19 - 01:30 PM

Synopsis:

MUFG maintains its forecast for the ECB to cut rates in September and December but acknowledges the risk of fewer cuts, which could support the euro. MUFG expects EUR/USD to test the upper end of its current trading range over the summer, with potential to retest last year's high if it breaks above 1.1000.

Key Points:

  • ECB Rate Cut Forecast:

    • September and December Cuts: MUFG sticks to its forecast for the ECB to implement rate cuts in September and December.
    • Risk of Fewer Cuts: There is a possibility that the ECB could cut rates less than expected, which would be supportive for the euro.
  • EUR/USD Outlook:

    • Current Trading Range: EUR/USD has been trending higher and is expected to test the top of the 1.0500-1.1000 trading range over the summer.
    • Potential Breakout: A break above the 1.1000 level could lead to a retest of the high from the end of last year at 1.1139.

Conclusion:

MUFG continues to forecast ECB rate cuts in September and December but notes the potential for fewer cuts, which would benefit the euro. EUR/USD is expected to test the upper end of its current trading range, with a possible move towards 1.1139 if it breaks above 1.1000.

Source:
MUFG Research/Market Commentary
By eFXdata  —  Jul 19 - 10:45 AM

Synopsis:

ANZ remains bearish on GBP despite stronger headline, core, and services CPI. Softening labor market data and slowly easing CPI pressures indicate a dovish sentiment within the Monetary Policy Committee (MPC), suggesting the recent GBP rally over 1.30 is tentative.

Key Points:

  • CPI Analysis:

    • Headline and Core CPI: Stronger CPI readings at the headline, core, and services levels.
    • Services CPI: While services CPI was steady at 5.7% y/y, excluding volatile items like package holidays, accommodation, and airfares leaves it closer to 5.4%.
  • Labor Market Data:

    • June Job Growth: Much of June's job growth was focused on the healthcare sector (161k out of 241k jobs created).
    • Median Pay Growth: Median pay growth rose only 3.6% y/y, the slowest growth since August 2020.
    • Signs of Weakness: Softening labor market data underscores some dovish sentiment within the MPC.
  • Monetary Policy Committee Sentiment:

    • Dovish Sentiment: Despite hawkish rhetoric from some members, the BoE's June meeting statement showed little reaction to CPI surprises and acknowledged the contribution of volatile items to elevated services CPI.
    • Governor's Comments: BoE Governor Andrew Bailey noted that not all CPI categories need to be back at 2% y/y for the BoE to begin easing rates.
  • Market Positioning:

    • Extended Positioning: CFTC non-commercial positioning shows extreme net long positions, indicating potential downside risk for GBP.
    • Historical Patterns: Similar extended positioning led to GBP downside in July 2023 and March 2024.

Conclusion:

ANZ remains bearish on GBP, citing softening labor market data, slowly easing CPI pressures, and a dovish sentiment within the MPC. The recent GBP rally over 1.30 is seen as tentative, with extended market positioning at risk of reversal, especially if the BoE delivers a rate cut in August despite strong CPI figures.

Source:
ANZ Research/Market Commentary
By eFXdata  —  Jul 19 - 09:42 AM

Synopsis:

BofA argues that the convergence of G10 growth rates in 2024 will be bearish for the USD, as the US growth outperformance seen in 2023 is expected to diminish. This dynamic, combined with softening US data and anticipated Fed rate cuts, supports a bearish outlook for the USD.

Key Points:

  • Focus Shift to Global Growth Dynamics:

    • Historical Focus: The market has focused on global inflation dynamics over the past 2-3 years.
    • Emerging Focus: Global growth dynamics are expected to gain importance as global central banks embark on a rate-cutting cycle.
  • G10 Growth Forecasts:

    • US Growth Convergence: Q4/Q4 G10 growth forecasts indicate US growth will "catch down" to the rest of the G10 after significant outperformance in 2023.
    • Economic Surprise Indices: This trend is already observable in economic surprise indices and Q1 2024 GDP releases.
  • Implications for USD:

    • Growth Differential: A shrinking US-world growth differential is bearish for USD, with a +55% long-term correlation since 1974.
    • Monetary Policy: Softening US data leading to eventual Fed cuts and falling US real rates this year are also bearish for USD from a monetary policy perspective.
    • Quant Signals: Near-term quant signals are bullish for GBPUSD, and the value factor favors NOK to catch up.
  • Moderate USD Weakness Expected:

    • Growth Outlook: While BofA does not expect US growth to fall below the rest of the world, any USD weakness this year is expected to be moderate.
    • Risk Factors: Potential geopolitical and political shocks later this year could derail the global soft-landing narrative and boost USD demand.

Conclusion:

BofA anticipates that the convergence of G10 growth rates in 2024 will be bearish for the USD. The diminishing US growth outperformance, coupled with softening data and anticipated Fed rate cuts, supports a bearish outlook for the USD. However, the expected USD weakness is likely to remain moderate unless geopolitical or political shocks disrupt the global economic landscape.

Source:
BofA Global Research
By eFXdata  —  Jul 19 - 08:49 AM

Synopsis:

Credit Agricole sees GBP as one of the best-performing G10 currencies, despite recent setbacks due to returning risk aversion and stickier-than-expected UK inflation. The GBP's relative strength is attributed to expectations that the BoE will maintain rates, reinforcing its status as a top performer in the G10 FX space.

Key Points:

  • Recent Performance:

    • End of Winning Streak: Risk aversion and stickier UK inflation have ended GBP's recent winning streak.
    • BoE Rate Expectations: The market expects the BoE to keep the bank rate unchanged on 1 August, postponing any rate cut decision to later in the year.
  • Upcoming Data Focus:

    • UK PMIs for July: The focus will be on the UK PMIs, particularly evidence of economic recovery extending into Q3.
    • Economic Resilience: Persistent economic resilience might convince policymakers to delay easing beyond August, although it is not central to the current debate.
  • FX Market Reaction:

    • Relative Expensiveness: Following its recent rally, GBP looks expensive against both EUR and USD when compared to short-term fair value estimates based on its relative rate appeal.
    • Long Positioning: GBP remains one of the biggest long positions in the G10 FX market, warranting cautiousness on the near-term outlook for the currency.

Conclusion:

Despite recent challenges, GBP continues to be one of the best-performing G10 currencies, supported by expectations of stable BoE rates and economic resilience. However, its current expensive valuation and significant long positioning suggest cautiousness in the near-term outlook. Upcoming UK PMIs will be critical in assessing whether economic recovery can sustain this momentum.

Source:
Crédit Agricole Research/Market Commentary
By Krishna K  —  Jul 18 - 11:50 PM
  • AUD/USD unchanged in Asia but remains on defensive after 1.2% drop this week

  • Repeated failures at 0.6800 triggers first decline in six weeks

  • Slight rally in U.S. yields after an extended phase of weakness undermines

  • Potential escalation of US-China trade conflicts, technology selloff weigh

  • Lack of concrete stimulus measures from China's Third Plenum disappoints

  • Falling copper, iron ore prices on weak China sentiment exacerbates AUD drop

  • Downside limited, RBA-Fed rate expectations diverge; Aus Q2 CPI July 31 key

  • Asia range 0.6695-0.6708; support 0.6690, 0.6675, resistance 0.6725, 0.6740

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  Jul 18 - 11:20 PM
  • GBP/USD on the defensive in Asia as USD holds Thu risk aversion gains

  • Weakened by failure to sustain rally above 1.3000 which triggers p/taking

  • Pullback from Wed's 1-year high to be expected after a 3.4% rise in July

  • U.S. yields rise after an extended phase of weakness, weigh; 10-yr +2bps Fri

  • UK pay growth slows but remains high for BOE, raises doubts on Aug rate cut

  • Slight divergence in Fed-BOE rate expectations likely to limit downside

  • June retail sales Fri; Asia range 1.29505-1.2935

  • Support 1.2900-10, 1.2860; resistance 1.3000-10, 1.3045-50

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  Jul 18 - 09:30 PM
  • GBP/USD on the defensive after closing 0.5% lower Thu on broad USD strength

  • Failure to sustain rally above 1.3000 triggers profit taking

  • Pullback from 1-year high hit Wed to be expected after a 3.4% rise in July

  • Rise in U.S. yields after an extended phase of weakness weighs

  • UK pay growth slows but remains high for BOE, raises doubts on Aug rate cut

  • Downside limited as Fed likely to be slightly more dovish than BOE

  • June retail sales Fri; Thu range 1.30125-1.29405, Fri Asia 1.29505-1.2940

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  Jul 18 - 08:35 PM
  • AUD/USD down 0.15% in Asia after falling 0.3% Thu on broad risk aversion

  • Undermined by pullback in U.S. yields after an extended phase of weakness

  • Potential escalation of US- China trade conflicts, technology selloff weigh

  • Lack of concrete stimulus measures from China's Third Plenum disappoints

  • U.S. copper -3.35% on China policy disappointment, Dalian iron ore down Thu

  • Downside limited as RBA-Fed rate expectations diverge

  • Support 0.6690-95, 0.6675, resistance 0.6620-25, 0.6640-45

  • Thursday global range 0.6743-0.6796; Asia Friday range 0.6708-0.6695

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jul 18 - 05:00 PM

Synopsis:

Danske Bank expects the ECB to implement four more rate cuts by the end of 2025. The ECB held rates unchanged in the July meeting and emphasized a data-dependent, meeting-by-meeting approach for future decisions.

Key Points:

  • July ECB Meeting:

    • Rates Unchanged: The ECB held its policy rates unchanged, as expected.
    • Data-Dependent Approach: The ECB reiterated a data-dependent and meeting-by-meeting approach without committing to any specific actions for September.
  • Market Expectations:

    • September Outlook: ECB President Lagarde stated that the decision for September is "wide open." However, markets are currently pricing in an 80% probability of a 25bp rate cut.
    • 2025 Pricing: Market pricing of 84bp for 2025 indicates slightly dovish expectations.
  • Rate Cut Projections:

    • Four More Cuts: Danske Bank expects the ECB to deliver four additional rate cuts by the end of 2025.

Conclusion:

Danske Bank anticipates that the ECB will cut rates four more times by the end of 2025, following the central bank's emphasis on a data-dependent approach and current market pricing trends.

Source:
Danske Research/Market Commentary
By Burton Frierson  —  Jul 18 - 02:45 PM

The dollar rose on Thursday, recovering some of its recent losses after the ECB held rates steady in a manner that kept alive expectations for a cut in September.

Lost in the fray was an unexpectedly large jump in U.S. initial jobless claims, though the Philly Fed business index posted a surprisingly large rise, accompanied by rebounding new orders and employment, while the prices paid gauge eased a touch.

The ECB statement said that incoming information broadly supports the governing council's previous assessment of the medium-term inflation outlook and President Christine Lagarde said that policymakers' decision in September is "wide open."

U.S.
Treasury yields were 3-4bp higher on the day with the 2s-10s curve little changed at a still inverted -27bp.

The S&P 500 was down 0.85% in New York afternoon trade after a brief rebound in chip and megacap stocks fizzled out, as investors rotated out of high-priced tech stocks and into underperforming sectors.

WTI was 0.17% lower, losing earlier gains.

Copper fell 3.28% without new stimulus from a key political meeting in China.

Heading toward the close: EUR/USD -0.36%, USD/JPY +0.64%, GBP/USD -0.44%, AUD/USD -0.32%.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Paul Spirgel  —  Jul 18 - 01:35 PM
  • GBP$ soft in NorAm afternoon trade -0.2% at 1.2869; Thurs range 1.2999-67

  • Hot Philly Fed index, slight dip in UK earnings weighed on GBP/USD

  • Sterling bulls respect 1.30 after in-court UK employment data nL1N3JA0PM

  • LSEG's IRPR shows slight rise in BoE rate cut projection into YE 2024

  • STIR's hint Fed a touch more dovish than BoE into YE 2024 may temper GBP dip

  • GBP$ support 1.2967 Jul 17/18 low, 1.2639 Jul 16 low, 1.2908 rising 10-DMA

  • Res 1.2999 upper 30-d Bolli, 1.3044 Jul 17 high, 1.3126 Jul 18 2023 high

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jul 18 - 01:30 PM

Synopsis:

HSBC highlights four key factors that suggest the coming months will be eventful for USD/JPY. The yen has gained significantly against the USD since mid-July, influenced by interventions and market dynamics, and several upcoming events are likely to impact the pair further.

Key Points:

  1. BoJ Tapering Details (July 31):

    • Tapering Announcement: The BoJ will announce details of its bond purchase tapering.
    • Market Pricing: Swap markets are pricing in 5bp of rate hikes, leaving room for a potential hawkish surprise from the BoJ.
  2. Fed Meetings and Jackson Hole Symposium:

    • Fed Meetings: The Fed meets on July 31 and September 18.
    • Jackson Hole: The Jackson Hole Economic Symposium takes place from August 22-24.
    • Impact: These events could influence USD/JPY through changes in US monetary policy expectations.
  3. Japan’s Liberal Democratic Party Leadership Elections (September):

    • Elections: The leadership elections in September could see politicians suggesting that the JPY is too weak.
    • Political Influence: Such suggestions could impact market sentiment and JPY valuation.
  4. US Election and Global Equity Volatility:

    • US Election: As the US election approaches, there could be high volatility in global equities.
    • Investor Outflows: This volatility might lead to retail investors’ outflow into foreign stocks, affecting USD/JPY.

Conclusion:

HSBC anticipates that the next few months will be eventful for USD/JPY due to several key events and factors, including BoJ policy announcements, Fed meetings, political developments in Japan, and potential volatility related to the US election. These factors could drive significant movements in the currency pair.

Source:
HSBC Research/Market Commentary
By Justin Mcqueen  —  Jul 18 - 12:25 PM
  • Sterling's retracement of CPI-led rally hints at topside exhaustion

  • GBP/USD back to pre-UK CPI levels at 1.2970

  • US-UK 10yr rate spread also points to downside risks for cable

  • Daily RSI > 75 has historically been a red flag for GBP bulls nL1N3J70JL

  • Crowded net long positioning is another hurdle to further GBP upside

  • While sticky services CPI has dampened an Aug cut. Prob = 40% 0#BOEWATCH

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jul 18 - 10:45 AM

Synopsis:

ING expects the Bank of Canada (BoC) to implement a second 25bp rate cut at the upcoming meeting, driven by rising unemployment and lower-than-expected inflation. This move is anticipated to maintain USD/CAD within its current trading range of 1.36-1.3750, with a potential descent to 1.35 as the first Fed cut approaches.

Key Points:

  • Rate Cut Anticipation:

    • Easing Cycle: The BoC began its easing cycle with a 25bp cut at the June meeting.
    • Unemployment Increase: The unemployment rate rose significantly to 6.4% from 6.2%.
    • Inflation Report: June inflation report came in below expectations, reinforcing the need for further rate cuts.
    • Market Pricing: Financial markets are pricing in a 22bp cut of the anticipated 25bp cut on July 24, making it likely that the BoC will proceed with the cut.
  • USD/CAD Trading Range:

    • Current Range: USD/CAD is expected to stay within the 1.36-1.3750 range due to opposing market forces.
    • Future Outlook: A descent to 1.35 is anticipated as the first Fed rate cut approaches, potentially shifting the USD/CAD dynamics.

Conclusion:

ING forecasts that the BoC will proceed with a second 25bp rate cut at the upcoming meeting, influenced by rising unemployment and lower-than-expected inflation figures. This action is likely to keep USD/CAD within the 1.36-1.3750 trading range, with a longer-term expectation of a move towards 1.35 as the Fed's first rate cut nears.

Source:
ING Research/Market Commentary
By Paul Spirgel  —  Jul 18 - 11:00 AM

GBP/USD failed again to hold gains above 1.30 falling from pre-UK data highs at 1.3013 to a NorAm session low 1.2970 after the unemployment rate and earnings came in as forecast, and bulls may be reluctant to probe for new highs above 1.3044.

The GBP/USD slide was not surprising considering sterling's recent run higher -- from late June lows by 1.2613 to Wednesday's 1-year peak at 1.3044 -- especially as the data added no new hawkish BoE rate expectations.

Since the late June lows GBP IMM net spec positioning has risen from +44k contracts to +85k contracts, and recent longs were no doubt happy to take some profit after the 3.4% gain.

Adding to the pound's slide is a dialing back of recent U.S.-UK rate divergence, which had ramped up recently as Fed rate expectations are currently seen slightly more dovish than the BoE by year end.

Despite the dip, the outlook for sterling remains bullish given that U.S.-UK front-end rate differentials in 2025 line up in the pound's favor.
LSEG's IRPR pages show a total of 144bp of Fed easing by June 2025, with the BoE expected to cut 96bp over the same time frame.

Should current rate expectations remain intact, the higher BoE policy path should provide the impetus for bulls to target July 2023 highs by 1.3144.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jul 18 - 09:34 AM

Synopsis:

BofA recommends buying dips in USD/JPY caused by intervention, maintaining a target of 163 by the end of the third quarter. Despite a bearish outlook for USD in the second half of 2024, they see near-term opportunities in the USD/JPY pair if certain conditions hold.

Key Points:

  • Bearish USD Outlook: BofA remains bearish on the USD for the second half of 2024, noting recent developments and the DXY's overvaluation as indicators of a potential faster move than current forecasts suggest.
  • Volatility and Technical Levels: If low volatility persists and key technical levels hold, the anticipated move could stall in the near term, especially if the Fed does not immediately endorse market pricing of nearly three rate cuts for 2024.
  • Intervention Dips: BofA suggests taking advantage of dips in USD/JPY caused by market intervention to buy, as these dips present potential entry points for the pair's upward movement.
  • Year-End Target: They maintain their end-third quarter target of 163 for USD/JPY, indicating confidence in the pair's potential to rise despite broader bearish sentiment for the USD.

Conclusion:

BofA recommends a strategic approach of buying USD/JPY during intervention-induced dips, with an end-3Q target of 163. While the overall outlook for the USD in the latter half of 2024 remains bearish, opportunities in the USD/JPY pair are seen if low volatility and technical levels support a near-term stall in the broader USD decline.

Source:
BofA Global Research
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