Synopsis:

BofA highlights a bullish outlook for USD/JPY, driven by a head and shoulders base pattern that suggests a long-term target in the 170s.

Key Points:

• Long-Term Forecast:
  Since early 2021, BofA has maintained a projection for USD/JPY to exceed 150, underpinned by a secular bottom indicated by a head and shoulders base.

• Technical Analysis:
  The analysis indicates a wave count comprising five waves leading to the target of the 170s. Wave III is anticipated to end near 160, followed by a corrective wave IV, which is expected to consist of three downward movements (A, B, C).

• Alternative Scenario:
  An alternate scenario suggests that the peak around 160 could mark the end of wave C. If this is the case, a substantial decline may occur over the next 1-2 years, potentially dropping USD/JPY to the 110-120 range.

Conclusion:

BofA’s analysis supports a bullish view on USD/JPY, projecting a significant upward movement towards the 170s based on established technical patterns. However, traders should remain vigilant of alternative scenarios that could lead to substantial declines, making careful monitoring of market developments essential.

• AUD/USD trades in a narrow range in Asia as traders take to the sidelines

• Caution into U.S. jobs data and a long weekend in Australia dampen activity

• Robust U.S. economy, higher U.S. yields, safe-haven USD demand undermine AUD

• Chances of 50bps cut in Nov cut back to 35% from 49% last week

• China stimulus euphoria, elevated commodity prices limit drop

• Friday range 0.6852-0.6840

• For more click on FXBUZ

• AUD/USD stays offered as safe-haven demand keeps USD supported

• Weighed down by robust U.S. economic data, higher U.S. yields

• Chances of 50bps cut in Nov now at 35% down from 49% last week

• Divergence in RBA rate stance with most other central banks supports

• China stimulus euphoria, elevated copper and iron ore prices limit drop

• Initial support at 0.6820, more at 0.6800; resistance 0.6875-80, 0.6900-05

• Friday range 0.6852-0.6840

• For more click on FXBUZ

• +0.05% after closing off 0.15% with the safe-haven U.S. dollar 0.25% higher

• EZ business activity slipped gently back into contraction last month

• The struggling Euro Zone economy is in sharp contrast to the resilient US

• Charts - daily momentum studies head lower, 21-day Bollinger bands expand

• 5, 10 & 21-day moving averages crest/fall, overall a negative setup

• Wednesday's 1.1082 top then Tuesday's 1.1143 high are first resistance

• Thursday's 1.1008 base and the 1.1002 Sept low next support

• A close below 1.1000 would be a strong bearish signal for next week

• 1.1000 3.418 BLN and 1.1050 694mln close Oct 4 strikes

  For more click on FXBUZ

• AUD/USD likely to stay on the defensive in Asia after closing 0.6% lower Thu

• Undermined by higher U.S. yields and robust U.S. economic data

• Weighed down by risk aversion induced by Middle East tensions

• Profit-taking on China-related trades adds to downward pressure

• Focus shifts to Fri U.S. jobs report, seen as key for Fed rate expectations

• Initial support at 0.6820, more at 0.6800; resistance 0.6875-80, 0.6900-05

• Thursday range 0.6830-0.68885

• For more click on FXBUZ

Synopsis:

CIBC projects the Australian dollar (AUD) to strengthen against the US dollar (USD) and face limited upside against the New Zealand dollar (NZD) in the fourth quarter. This outlook is influenced by the Reserve Bank of Australia's (RBA) shift to a more neutral stance, stronger AUD performance due to China stimulus, and differing monetary policies between Australia and New Zealand.

Key Points:

• RBA's Shift to Neutral Stance:
  • In September, Governor Bullock indicated a more neutral monetary policy by not explicitly considering a rate rise.
  • The RBA noted easing wage pressures and shifted the outlook to acknowledge two-way risks to policy rates.
• Inflation and Rate Cut Expectations:
  • August CPI for Australia fell to 2.7% YoY from 3.0%, within the RBA’s target band of 2-3%.
  • The RBA expects CPI (excluding cost-of-living relief) to return to target range by 2026, delaying potential rate cuts until February 2025.
  • The RBA does not foresee an immediate rate cut due to expected short-term CPI decreases from government relief measures.
• Impact of China Stimulus:
  • Recent Chinese stimulus measures have strengthened the AUD, as the currency is viewed as a proxy for China risk sentiment.
  • Australia's resilient services sector has contributed to the RBA's relative hawkishness.
• AUD/USD Outlook:
  • CIBC forecasts AUD/USD to rise to 0.71 in Q4, driven by stronger AUD performance linked to positive China headlines and sustained RBA policies.
• AUD/NZD Dynamics:
  • Despite a recent decline from late July highs of 1.11, long positions in AUD/NZD remain popular due to the hawkish RBA versus dovish Reserve Bank of New Zealand (RBNZ).
  • CIBC expects AUD/NZD to peak at 1.0950, noting that large Fed rate cuts would benefit the NZD more than the AUD.

Conclusion:

CIBC maintains a bullish outlook on AUD/USD, targeting 0.71 in Q4, supported by China's stimulus measures and the RBA's stable stance. However, AUD/NZD is expected to encounter resistance, peaking at 1.0950, as the NZD is likely to outperform the AUD in the face of significant Fed rate cuts. Investors should monitor China’s economic developments and upcoming RBA signals to navigate these currency pairs effectively.

• USD/JPY settles in middle of 146.29-147.25 day's range on EBS even as Treasury yields advance

• Upward momentum is slowed by an expanding 147.10-151.82 Ichimoku cloud, 147 options and volume drop off

• Overnight volatility is near 26% ahead of the U.S. jobs number Friday

• Session high of 147.25 approximates the level in early August when CFTC data showed accounts flipping to long yen

• Further resistance seen at the weekly Ichimoku top of 148.38

• Nearby retracement supports are 146.52 Wednesday high and 146.27 upper Bollinger

For more click on FXBUZ

• GBP/USD is supported by dip-buying below 1.31 though fails to top the Sept. 17 Reuters-dealing low of 1.3143

• Cable was 1.3245 prior to slide on Guardian interview with BoE Governor Bailey that sent it crashing to a 1.3094 three-week low

• Bailey said the central bank could become 'more aggressive' on rate cuts as inflation slows

• Cable dip buyers may relent if spot fails to return to 1.3245 in coming sessions

• Option accounts protecting against losses help send implied volatility to a year-to-date high

• Long futures positions built since 1.28 are vulnerable on close below 1.30

For more click on FXBUZ

Synopsis:

TD emphasizes the complex market environment driven by China's stimulus and synchronized central bank actions, suggesting a cautious yet strategic approach to G10 FX trading through the end of the year.

Key Points:

• Reflation vs. Inflation Risks:
  The resurgence of reflation amid global growth signals is evident, but there are concerns about inflation rising alongside it, potentially leading to stagflation fears. This backdrop complicates the trading landscape.

• Synchronized Policies and Geopolitical Uncertainty:
  With many nations holding elections this year, discontent with political and economic conditions remains high. Geopolitical tensions are increasing, and the market struggles to define the macroeconomic regime—whether it’s a soft, hard, or no landing.

• Positive Outlook for USD:
  TD maintains a bullish outlook on the USD, driven by:

  1. Data Recovery: Improvement in U.S. economic data relative to the Eurozone and China.
  2. Positioning Dynamics: Current market positioning is heavily skewed, favoring a USD rise.
  3. Macro Volatility: Anticipation of increased macroeconomic volatility due to uncertainty and political developments.

• Currency Preferences:

  • Buy USD vs. NZD and EUR: TD advises positioning for USD strength against these currencies.
  • Sell Opportunities: Look for better levels to sell EUR, GBP, and SEK against JPY.
  • Attractive Pairs: AUD/NZD and NOK/SEK are identified as pairs with upward potential.

Conclusion:

TD's strategy for G10 FX trading into year-end favors a stronger USD, supported by relative data recovery, positioning dynamics, and anticipated macro volatility. Traders are encouraged to monitor geopolitical developments and macroeconomic indicators closely while considering strategic entries and exits in targeted currency pairs.

• Ether hit a 15-session low Thursday, traded towards $2308.00

• Rising US yields US2YT=RR, US$ have helped drive Ether downward

• Riskier assets weaker as investors lower probability for Fed cuts SRAM25

• Gold XAU=, stocks ESv1 trade lower while USD/CNH hit a 7-session high

• Ether techs lean bearish; trades below 10- & 50-DMAs, RSIs are falling

• September monthly low, 76.4% Fibo of 1520-4093.70 rally are now in focus

• US Sept. Payroll report & its impact on Fed policy risk looms for Friday

• An above estimate result may rally yields, US$ & send Ether lower again

• For more click on FXBUZ

Synopsis:

HSBC highlights that the USD remains the primary safe haven, especially in light of recent developments concerning the CHF and JPY.

Key Points:

• The Swiss National Bank (SNB) has shown that its tolerance for CHF strength is limited, as underscored by comments from the new SNB president. Recent Swiss inflation data fell below consensus at 0.8% YoY in September (expected 1.0%), which is likely to increase the SNB's discomfort with a rising CHF in safe-haven flows.
• In Japan, new Prime Minister comments indicated hesitance towards further rate hikes, stating the environment isn't ready for additional increases. BoJ board member Asahi Noguchi emphasized the need for a pause after a single hike to assess its impact, while Governor Ueda advocated for a cautious approach regarding future rate decisions.
• Given this less hawkish stance from Japanese policymakers, the appeal of the JPY as a safe haven is diminished.

Conclusion:

Amid escalating geopolitical risks and the impending US elections, the USD is positioned as the preferred safe haven, overshadowing the traditional roles of the CHF and JPY.

• Headline & prices paid component of ISM non-mfg PMI above estimates

• Employment component dropped to 48.1, indicates contraction

• Despite weaker jobs US yields US2YT=RR, US$ firmed up further

• EUR/USD initially had a muted reaction then fell to new session lows

• 1.10175 traded on EBS then the pair bounced back above the 55-DMA

• EUR/USD traded down -0.08% and techs still leaned bearish

• RSIs are falling & pair traded below the 5- & 21-DMAs

• US Sept. payroll Friday, may have muted the reaction to ISM services

• For more click on FXBUZ

Synopsis:

BofA contends that the forthcoming US September jobs report on Friday should not entirely eliminate the possibility of a 50bps rate cut by the Fed. The market has already front-loaded Fed cuts and is leaning towards a softer landing scenario.

Key Points:

• The market currently prices in approximately 34bps of cuts for the November meeting, having adjusted expectations after a somewhat hawkish tone from Powell earlier this week.
• BofA's US Economics team forecasts a headline nonfarm payrolls (NFP) increase of 150k and an unemployment rate of 4.2%, which aligns with the Fed’s forecasts and the Summary of Economic Projections (SEP).
• Although a soft employment report could lead the market to pare back expectations for cuts, it would likely still keep the 50bps option on the table.
• Upcoming data, including September inflation and October NFP, will influence the Fed's decisions, especially with core PCE showing a 2.1% annualized rate last week, justifying a lower policy rate.
• Governor Waller’s recent comments on the rationale for larger cuts support the notion of a front-loading strategy, as the disinflation trend remains intact.

Conclusion:

The market should remain attentive to labor data in the coming weeks, but inflation metrics will also play a crucial role in shaping expectations for potential rate cuts by the Fed

Synopsis:

MUFG has revised its outlook for the Bank of England (BoE), now expecting back-to-back rate cuts before year-end. This adjustment reflects growing evidence of decelerating economic growth in the UK.

Key Points:

• Recent sentiment indicators, including the GfK consumer confidence index, PMIs, CBI Orders index, and the Lloyds Business Barometer, are showing a downward trend, suggesting weaker growth and potential softening in inflation.
• With anticipated cuts from both the Fed and ECB before year-end, the negative impact on the pound is expected to be limited.
• Despite long GBP positions being popular and successful this year, there is a risk of a downside correction if financial market volatility increases due to heightened risk aversion.

Conclusion:

Investors should remain cautious about GBP exposure as the economic landscape shifts, with the potential for rate cuts and market volatility posing challenges ahead.

• EUR/USD -0.05%, USD/JPY 0.26%, GBP/USD -1.1%, AUD/USD -0.57%

• S&P E-minis -0.33%, DAX -0.5%, Nikkei 225 1.97%, FTSE 0.29%

• Euro under pressure as key support levels give way nL1N3LF080

• USD/JPY's Ishiba inspired jump runs into solid tech supply nL1N3LF05O

• GBP/USD sinks to three-week low on BoE chief's dovish steer nL1N3LF085

• AUD/USD hugs 0.6850 expiry after drop to one-week low nL1N3LF0AZ

• Option expiries nL1N3LF05H. U.S. Open nL4N3LF0NF

• Significant step lower now targets a key 50% Fibo level

• The retracement point, 1.3045, is taken off the 1.2656-1.3434 Aug-Sep rally

• Five day drop from 1.3434 reaches 1.3107

• Daily RSI falls to 45 but has room to extend the bearish confirmation

• Our 1.3406 short profit take at 1.3190 proving to be a cheap cut

• Potential for a return to the 1.3003 low from September 11

• We stand aside for now. (PS)

• GBP/USD trader TGM2338

For more click on FXBUZ

• 15 billion euros of FX options between 1.10-1.11 expire 10-am New York Thurs

• Related hedging flows will make it difficult for EUR/USD to move too far

• EUR/USD trades 1.1048-25 Thurs, after drop from highs above 1.1200 this week

• Support 12-11 Sept lows 1.1006/02. Market on alert for U.S. NFP Friday

• Overnight expiry option implied volatility 9.0 to 13.5 since NFP capture

• Break-even just shy of last months 2024 jobs data high of 67 USD pips

• Watch 1-month options to gauge the FX risk attached to the U.S. election

For more click on FXBUZ

• Cable drops to 1.3124 as pound continues to suffer on Bailey's dovish steer

• 1.3124 is lowest level since Sept 13 (vs 1.3245 before Bailey guidance)

• Governor Bailey says BoE could become "a bit more aggressive" on rate cuts

• Next BoE rate decision Nov 7: 25 bps cut to 4.75% is consensus expectation

• GBP/USD bids likely around 1.3100 (1.3104 is 76.4% Fibo of 1.3003-1.3434)

• 1.3170 (earlier stall point) is now a resistance level, ahead of 1.3200

• USD/JPY soars after Ishiba-Ueda meet, yen crosses follow nL1N3LF02G

• EUR/JPY and USD/JPY 30/60-day log correlations both above +0.90

• USD/JPY rose from 146.29 to 147.25 on the EBS, Thursday, before falling back

• Wed's big jump breaks last week's peak, but thick cloud caps nL1N3LF053

• The daily Ichimoku cloud currently spans 147.10-151.82 region

• PM Ishiba could help EUR/JPY make its usual Oct gains nL1N3LE0E9

• GBP/USD tumbles as low as 1.3170 from 1.3270; precarious

• Breach and closing below 23.6% Fibo 1.3166 will cue shorts

• That would expose Bollinger downtrend channel at 1.3121

• If engaged, bearish path points to test of 1.3000 ahead

• Dovish comments from BoE spur rate cut bets nP8N3L604U

• Governor Bailey says may be "a bit more activist" on rate cuts

• For more click on FXBUZ

• Sterling slides under its daily kijun line to a 1.3177 Thurs low

• Our 1.3406 short profit level met at 1.3190: await fresh signals

• Sights set on 61.8%-76.4% Fibo levels off 1.3000-1.3434, 1.3166 and 1.3102

• Fourteen day momentum poised to flip negative and RSI has room to fall

• We still lean bearish but will look at rebounds to exploit

• GBP/USD trader TGM2338

  For more click on FXBUZ

• Off 0.1% at the base of a 1.1035-1.1048 range with the U.S. dollar up 0.1%

• Services PMIs lead Euro Zone event risk, but are unlikely to move markets

• U.S. ISM services PMI and weekly unemployment claims lead event risk

• Charts - daily momentum studies head lower, 21-day Bollinger bands expand

• 5, 10 & 21-day moving averages crest/fall, as signals turn negative

• Wednesday's 1.1082 top then Tuesday's 1.1143 high are first resistance

• Yesterday's 1.1032 base is under pressure - 1.1002 Sept low next support

• 1.1025 1.069 BLN, 1.1050/55 1.913BLN and 1.1060 2.374BLN close Oct 3 strikes

For more click on FXBUZ

Synopsis:

Credit Agricole analyzes the implications of the Fed's recent 50bp cut and its impact on FX volatility, drawing insights from past easing cycles in 2001 and 2007.

Key Points:

• Historically, FX option markets have encountered significant volatility during bold Fed actions, specifically when the first cut was substantial (50bp).
• In both 2001 and 2007, USD implied volatilities increased in anticipation of the cuts but exhibited different behaviors post-announcement.
  • In 2001, implied vols decreased even as subsequent 50bp cuts followed.
  • In contrast, in late 2007, implied vols increased as the Fed shifted to smaller cuts.
• The overall economic environment during these periods differed, with high USD/high vol in 2001 versus low USD/low vol in 2007.
• Currently, the USD is in a high/low volatility state, suggesting a complex response to future Fed actions.

Conclusion:

Given the current uncertainties in monetary policy and economic conditions, Credit Agricole recommends adopting a cautious stance and positioning to buy FX volatility as a hedge against potential market fluctuations.

• AUD/USD down 0.25% in Asia, nears initial support at 0.6857, the low on Mon

• USD strength weighs; Fed 50bps Nov cut chances now at 35% from 57% last week

• Hang Seng Index drops 2.8% on profit-taking after 24% rally since last Tue

• Undermines AUD as it is seen as proxy for China markets which are closed

• Elevated commodity prices, higher-for-longer RBA rate stance support AUD

• Resistance 0.6900-05, 0.6915-20, support 0.6855-60, 0.6820-25

• Asia range 0.6863-0.68885

• For more click on FXBUZ