• AUD/USD bounce extends as high as 0.6380 from 0.6351 open

• But stalls as key intraday resistance at 0.6385 nears

• Ceiling of Bollinger downtrend channel will attract offers

• Thurs close below that will maintain short-term bearish bias

• Asia stocks mostly recover as UST yields abate; 10y 4.597%

• China gloom lingers but yuan steadies into holidays nL8N3AX0GT

• For more click on FXBUZ

• Steady at the base of a tight 1.2131-1.2146 range, with moderate D3 flow

• Strong trend, but 1.2067, 38.25 2022/23 rise likely resilient at quarter end

• No significant UK data or BoE events, so yield spreads, USD to lead sterling

• Charts: 10 weeks of lower GBP/USD highs leaves the pound trending south

• 5, 10, and 21 daily and weekly moving averages slide, a strong bearish setup

• Downtrend targets a test of 1.2067, 38.2% retracement of the 2022-2023 rise

• A close above the 1.2267 10 DMA would flag caution to bears

• NY 1.2111 low and Asia's 1.2146 top are initial support and resistance

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TD Securities is closely monitoring the ongoing developments in Congress, highlighting the imminent risk of a government shutdown at the end of September if legislative progress is not made soon. The market has seemingly adjusted to the increasing likelihood of a shutdown, but the duration of such a halt is crucial.

Key Points:

1. Legislative Stalemate: TD Securities notes that the upcoming days are pivotal, with Congress' actions determining whether the government will face a shutdown at the end of September. The absence of legislative advancements makes a shutdown increasingly plausible.

2. Market Composure: The markets appear to have assimilated the heightened probability of a government shutdown. However, the emphasis is on the extent of the legislative deadlock and the ensuing shutdown duration.

3. Potential Market Impact: Shutdowns typically do not have an immediate effect on markets, but their significance grows if they persist. This implies that while short-term disruptions might not lead to significant market fluctuations, prolonged shutdowns could eventually trigger market reactions.

Summary:

TD Securities underscores the criticality of the unfolding events in Congress, emphasizing that the prospective government shutdown at the end of September is contingent on the legislative proceedings in the coming days. Although markets seem to have accommodated the rising shutdown odds, the impact on the markets is largely tied to the duration of the shutdown. In essence, government shutdowns might not instantly influence markets, but their impact can intensify if they are extended.

• Aus August retail sales came in slightly weaker than expected nAZN1BLSS3

• Market ignoring the slight miss with AUD/USD tracking higher in early Asia

• Mood in relatively buoyant, as E-minis +0.26% and USD/CNH back below 7.3200

• AUD/USD trading @ 0.6365 with resistance @ 0.6415/20 where 10 & 21-day MAs converge

• Selling rallies while 0.6420 caps is the favoured strategy

• For more click on FXBUZ

• Steady after closing down 0.2% amid broad-based USD strength

• Yield spreads widened, 10yr gilt +2bp 4.352%, 10yr UST +5bp 4.607%

• Britain’s energy grid operators expect sufficient supplies this winter

• Charts: 10 weeks of lower GBP/USD highs leaves the pound trending south

• 5, 10, and 21 daily and weekly moving averages slide, a strong bearish setup

• Downtrend targets a test of 1.2067, 38.2% retracement of the 2022-2023 rise

• A close above the 1.2268 10 DMA would flag caution to bears

• NY 1.2111 low and London 1.2164 top are initial support and resistance

  For more click on FXBUZ

• EUR/USD opens -0.66% after surge in US yields underpinned USD nL1N3B331N

• It broke below Mar 15 low @ 1.0516 - with next support @ Jan 6 low @ 1.0486

• A break below 1.0485 target the 50% of 0.9528/1.1276 move at 1.0402

• EUR/USD trending lower with the 5, 10 & 21-day MAs in a bearish alignment

• Resistance is at the 10-day MA at 1.0616 and 21-day MA at 1.0680

• Trend lower is convincing and selling rallies is the favoured strategy

• For more click on FXBUZ

• AUD/USD opens -0.70% after USD broadly firmed as US yields tracked higher nL1N3B32KDnL1N3B331N

• AUD/USD broke and closed below double-bottom and 2023 low at 0.6358

• The next support is at the Nov 3, 2022 low at 0.6272

• Resistance is at 0.6415/20 where the 10 & 21-day MAs converge

• Aus retail sales for August out today with market expecting +0.3% M/M

• Selling AUD/USD rallies the favoured strategy still

• For more click on FXBUZ

ING provides insights on how the EUR/USD exchange rate might react if the yield on 10-year US Treasuries reaches 5%. Based on their simulation using historical data, ING believes that a significant rise in 10Y Treasury yields could lead to a notable depreciation in the EUR/USD pair.

Key Points:

1. 5.0% 10Y US Yields Are Plausible: ING's rates strategy team suggests that a 5.0% yield on 10-year US Treasuries is no longer an improbable scenario. This view is supported by the recent "higher-for-longer" narrative from the Federal Reserve that has bolstered the dollar. The subsequent rise in Treasury yields has significant ramifications for the foreign exchange market.

2. Simulation Results: By running a simulation based on the past year's relationship (coefficients) between EUR/USD and 10Y Treasury yields, ING estimates that the EUR/USD pair would trade at approximately 1.02 if 10Y Treasury yields hit 5.0%.

3. Historical Parallel: The proposed drop in EUR/USD to 1.02 in the scenario of 5.0% 10Y yields represents a 3.5% decline from current exchange rates. This rate of depreciation aligns with historical movements observed when 10Y Treasury yields increased from 4.0% to the current 4.50%. During that period, EUR/USD slid from 1.10 to 1.06.

Summary:

ING underscores the potential interplay between US Treasury yields and the EUR/USD exchange rate. Based on their analysis, if 10-year US Treasury yields were to reach the 5.0% mark, it could exert significant downward pressure on the EUR/USD pair, possibly pushing it to trade around the 1.02 level. This perspective is rooted in both historical trends and recent monetary policy narratives from the Federal Reserve.

• USD/JPY made new 2023 highs on Wednesday

• The 149.71 high tested the last high before 2022's 32-year peak

• That Oct. 24 high at 149.70 is the last before Oct. 21's 151.94 peak

• There's 150 figure resistance to clear first

• And the top of 2023's rising channel, Thur at 150.67 on EBS

• Since Sep. 1, pullback found support by the daily tenkan, now at 148.52

• Uptrend is intact unless kijun & 30-DMA, now at 147.07/06, closed below

For more click on FXBUZ

• NY opened near 1.0555 after EUR/USD drifted lower in overnight trading

• Pair's slide intensified on strong US yield US10YT=RR, US$ rallies

• Hawkish leaning comments from Fed's Kashkari helped fuel the gains

• Risk-off buoyed US$; USD/CNH hit 7.3200 while stocks Esv1 fell again

• Oil LCOc1 rally to a 10-month high likely added weight on EUR/USD

• Techs are bearish; falling RSIs & hold below 10-DMA highlight downside risks

• US weekly & continuing claims, Q2 GDP final reading are risks in NY Thursday

• For more click on FXBUZ

Goldman Sachs suggests that investors should consider fading (i.e., going against) any US Dollar (USD) weakness that might arise due to a potential US government shutdown. The firm provides multiple reasons, from both historical and economic perspectives, for this stance.

Key Points:

1. Temporary Decline: A significant portion of the decline caused by a government shutdown and workers' strike would likely be reversed in the subsequent quarter (Q1). This suggests the negative impact on the economy might be transient.

2. Real vs. Nominal GDP: The effects of a government shutdown would primarily impact real GDP, as opposed to nominal growth. This is under the assumption that federal workers receive their full wages retroactively after the shutdown ends. Essentially, the economic output might be disrupted, but the total value (including inflation) remains mostly stable.

3. Implications for Inflation: Due to the difference between real and nominal GDP during a shutdown, there's a technical increase in PCE (Personal Consumption Expenditures) inflation. Furthermore, a workers' strike could lead to wage gains. This, in turn, could emphasize the difficulties of managing inflation targets while the labor market remains robust.

4. "Data Blackout" and the Fed: While a potential "data blackout" (a period when data is not available due to the shutdown) might slightly impede the Federal Reserve's capability to enact a rate hike in November, Goldman highlights that there's ample data from both the Fed and private sectors in the US. The firm cites the past, noting the Fed's decision to begin tapering in December 2013 right after a government shutdown, as an example of its capability to act even with limited data.

Summary:

Goldman Sachs suggests investors might consider countering potential short-term weaknesses in the USD resulting from a US government shutdown. The firm believes that while there might be initial negative impacts on real GDP, the overall nominal growth would largely remain intact, and any decline would likely be transient. Additionally, the implications for inflation and the Federal Reserve's past actions post-shutdown indicate that the economic impacts might not be as severe or long-lasting as feared.

• $CAD -0.1% at 1.3502 in early NorAm; trades muted 1.3536-02 in NorAm

• Pair off NorAm open high as oil rallies 3.6%, copper flat

• Canada yields moving higher, versus near flat UST yields

• $CAD res Wed high/21-DMA at 1.3541, 1.3592 Sep 12 high

• Support 1.3502 Wed low, 1.3487 10-DMA, 1.3435 daily cloud top

Overview:
MUFG (Mitsubishi UFJ Financial Group) articulates a strong likelihood of Japanese intervention in the foreign exchange market but perceives it plausible primarily after the USD/JPY breaks above the 150 level. The recent remarks from Finance Minister Suzuki are seen as indicators of heightened intervention probability.

Key Insights:

1. Observation of FX Movements:
   Finance Minister Suzuki is persistently addressing FX movements, expressing that he’s monitoring the Forex with “a strong sense of urgency,” especially as USD/JPY broke above the 149 level. The frequent addressing of yen moves by the Ministry of Finance (MoF) is recognized as aligning with higher actual intervention risks.

2. Intervention Impediments:
   The present FX moves are neither “rapid” nor “disorderly,” posing a barrier to immediate intervention. Initiating intervention under current circumstances would likely be perceived as defending a specific level (150.00) rather than countering volatility, potentially reinforcing market impressions and expectations related to that level.

3. Anticipated Conditions for Intervention:
   MUFG expects intervention to become a viable option once the USD/JPY surpasses the 150-level. This scenario could lead to increased volatility and possibly “disorderly” price actions, fueled by stops, providing a more substantiated rationale for the Ministry of Finance to step in.

Summary:

MUFG foresees a notable chance of Japan intervening in the FX market, especially if the USD/JPY surpasses 150. The consistent and heightened remarks on FX moves by Finance Minister Suzuki and the Ministry of Finance elevate the intervention probability, but the current orderly nature of FX moves offers little justification for immediate action. The intervention is likely perceived as more justified if disorderly price actions follow a break above the 150-level in USD/JPY.

GBP/USD found support in early NorAm at 1.2131 but remained lower on the day vulnerable as bears ride the lower 30-day Bolli lower, eying light support at the March 17 low of 1.2103 and more significant support at the March 12 low at 1.2012.

Cable's woes come as the dollar extends its surge on high-for-longer Fed expectations, whittling sterling gain for the year down to just 0.4% as the BoE's increasingly dovish rate path also draws market scrutiny.

The Fed's hawkish hold last week, noting inflation remains a concern, contrasted with the BoE surprise decision to halt its rate hike cycle on a 5-4 vote as UK growth concerns lead to a more cautious policy to assess the effects of past tightening.

The BoE rate outlook, even with UK inflation still near 7%, has sapped sterling bulls of their early 2023 vigor.

Without a significant drop in UK inflation, the dovish tone may move GBP/USD lower still, putting March 2023 lows by 1.1805 in focus, as traders doubt the BoE's ability to keep inflation expectations anchored.

For more click on FXBUZ

Highlights:
Bank of America (BofA) perceives an increasing tilt towards higher rates and a steeper yield curve. The post-COVID narrative of 'there is no alternative' (TINA) to equities has now shifted to the current sentiment that 'there are many alternatives' (TAMA), suggesting a broader array of investment choices beyond just equities.

Key Takeaways:

1. US Treasuries as an Attractive Option:

   • BofA regards US Treasuries (USTs) as a growingly enticing alternative to risk assets. The bank believes U.S. interest rates will continue to rise until we see a slowdown in the real economy, negative reactions from risk assets, or until enough interest rate hikes are priced out, which would in turn limit further significant sell-offs.

2. Reasons for Rising US Rates:

   • Several factors have driven up US rates:
     • Persistent robust US economic data.
     • A challenging supply and demand scenario.
     • Overextended UST market positioning.
   • These dynamics have adjusted market expectations from 150bp worth of interest rate cuts in July to just 75bp of cuts for 2024.
   • The September FOMC meeting played a significant role in triggering the recent sell-off in treasuries.

3. Powell's Stance:

   • BofA infers that Federal Reserve Chairman Jerome Powell might not be entirely convinced that the current rates are restrictive enough. This suggests that US interest rates might need to climb further until they start having a noticeable dampening effect on economic activity.

In Summary:

Bank of America forecasts a trend of rising interest rates and an increasingly steep yield curve. A shift in market sentiment, from a previous lack of alternatives to equities to a present environment with a broader spectrum of investment options, is a key component of this outlook. The bank believes US interest rates will continue their upward trajectory until certain economic and market dynamics are realized.

Highlights:
ANZ is keeping a keen eye on opportunities to buy AUD/CAD, forecasting a move towards the 0.89 mark. The bank remains optimistic about this strategy, despite a recent unsuccessful attempt.

Key Takeaways:

1. Chinese Economic Data:

   • The bank emphasizes that the success of this tactical trade hinges heavily on correctly timing a turnaround in Chinese economic statistics.
   • Recent data from Caixin’s manufacturing PMI hinted at early indications of stability in the Chinese economy.

2. Economic Dynamics in the US:

   • If the US economy witnesses a downturn while China is on the path of recovery, it will cause the Canadian Dollar (CAD) to depreciate in comparison to the Australian Dollar (AUD).

3. Awaiting More Concrete Data:

   • ANZ is adopting a cautious approach, waiting for more tangible signs of stability in the Chinese economy before diving into this tactical trade.

In Summary:

ANZ is closely monitoring the AUD/CAD pair for buying opportunities on dips, targeting a prospective move towards the 0.89 level. The bank's strategy is largely influenced by economic conditions in China and the US. With initial indications of stability emerging from China, ANZ remains hopeful, though it waits for further confirmatory economic data before making a definitive move.

• AUD/USD rallied to 0.64085 in Asia after PBOC fixing, sellers emerged

• US$ bulls remained in control; USD/CNH rallied 7.3008-7.3195 on D3

• AUD/USD hit 0.6366 early NY despite equity ESv1, iron-ore DCIOc2 gains

• US yield US2YT=TWEB drop didn't stop AUD/USD from making a 14-session low

• Techs are bearish; RSIs falling, pair below 76.4% Fib of 0.6170-0.7158 rally

• US August durable goods report is a data risk in NY

• For more click on FXBUZ

• Dollar benefits from higher-for-longer U.S. rates prospect nL1N3B30JT

• Elevated U.S. yields have spelt trouble for the yen nL1N3B30J6

• BOJ's July debate highlights rift in view on rate hike timing nL1N3B300Q

• USD/JPY has seen a 148.86-149.15 range, on Wednesday, EBS data shows

• It hit a new multi-month high Tuesday, 149.18, despite intervention worries

• USD/JPY chart points to a 150 break, 2022 high retest nL1N3B30HI

• USD/JPY, EUR/JPY usually rise in September nL1N3AH0Q6nL1N3AH2TR

• EUR/USD has dropped to the peak of the weekly Ichimoku cloud

• Cloud 1.0539-1.0281 is an area of potentially strong support

• The cloud is set to thicken and rise - may support higher ranges

• A break into the cloud could deepen the correction unfolding since July

• Targets for a break lower are 1.0402, 1.0196 and 0.9941

• Record plunge in M3 is an issue for ECB and euro nL1N3B30M1

• Holding dollars could solve a lot of problems nL1N3B30H7

• USD/JPY scope growing for much bigger gains above 150 psychological level

• That would unmask the 2022 151.94 peak for a retest

• USD/JPY registered its fifth weekly close above the 146.11 Fibo last week

• 146.11 Fibo is a 76.4% retrace of the 151.94 to 127.22 (2022 to 2023) fall

• 14-week momentum remains positive, reinforcing the bullish structure

• EUR/JPY sees a 157.31-59 range, according to EBS prices, on Wednesday

• USD/JPY Trader TGM2336. Previous update nL1N3B20D2

• Another new trend low but rebound risk from 1.2135 is high

• GBP could benefit from a bout of profit taking ahead of a Fibonacci level

• The 76.4% retracement of the 1.1805-1.3144 climb is at 1.2121

• Still respecting the underlying bear trend while below the 200DMA, 1.2435

• Note, the 21DMA is poised to cross below the 200DMA: strong bear signal

• A sell level seen at 1.2298, the 10DMA

  for more click on FXBUZ

• EUR/USD's 14-day momentum remains negative, reinforcing the bearish market

• Also tenkan and kijun lines are negative aligned, adds to the downside bias

• We are looking to get short at 1.0599, in anticipation for a bigger drop

• Scope for losses to the 2023 1.0482 (EBS) low posted back in January

• Interim resistance at Tuesday's 1.0609 high should limit recovery attempts

• EUR/USD Trader TGM2334. Previous update nL1N3B20C6

• FX traders will likely take the dollar even higher nL1N3B20JZ

• The 200-day moving average continues to stand over the cross

• The line, at 0.8711 today, has formed resistance since May

• We are maintaining a 0.8689 short for 0.8598 with a stop at 0.8730

• Trade at risk to a developing bullish continuation pattern

• Drop under 0.8664 Sept. 22 low needed to negate the pattern

• Daily momentum readings remain over bought

  For more click on FXBUZ

• A touch softer in a 148.86-149.10 range on EBS, as yield spreads tightened

• 2yr Treasury yields are off 8bp to 5.056%, 10yr UST trades -3bp to 4.517%

• BOJ minutes agreed on the need to maintain ultra-loose monetary settings

• There was no consensus on when to end negative interest rates

• 150.00 is the key psychological zone - solid UST yield gains needed to test

• Charts; daily Tenkan line, 5, 10 & 21 day moving averages all head higher

• 147.53 21 DMA is pivotal support - a base on the close during this trend

• Long-term target is a test of the 151.94 2022 trend high

For more click on FXBUZ