• EUR net spec long drops to 55,327 contracts as of Tuesday from 71,698 the previous week

• JPY net spec long retreats slightly from recent highs, reduced to 56,772 contracts from 66,011

• GBP net spec long rises to 93,765 from 86,992

• AUD net position flips to long of 14,528 from short of 11,248, according to LSEG data

• CAD short grows to 70,003 from 65,589

Corrects typo in lead, removes reference to Israel, Iran

The dollar index vaulted higher Friday and was on pace for its best week in two years following a strong U.S. jobs report for September.

Non-farm payrolls increased a more-than-forecast 254k on the month, the unemployment unexpectedly fell and hourly earnings grew faster than expected.

Odds of another supersized rate cut by the Fed in 2024 were erased after the data and markets now foresee two 25 basis point reductions by year end.

Chicago Fed President Austan Goolsbee said, via a Bloomberg TV interview, that he does not want to react to one data point and that policymakers must be careful keeping rates as restrictive as they currently are.

Canada’s Ivey PMI index moved back above 50 in September, indicating economic growth.

The Bank of England should move only gradually with cutting interest rates, Chief Economist Huw Pill said Friday.

The yen slumped after the U.S. data and was set for its worst week since 2009.

Israel said it targeted the intelligence headquarters of Hezbollah in Lebanon and the U.S. struck Houthi targets in Yemen Friday.

Treasury yields were 8-20 basis points higher as the curve flattened.
The 2s-10s curve was down about 8 basis points to +5.6bp.

The S&P 500 rose 0.53%.

Gold dipped 0.30% as Treasury yields firmed.

Copper edged up 0.32% as demand expectations built after the U.S. data

Oil climbed 0.69% amid concerns Middle East supplies are at risk.

Heading toward the close: EUR/USD -0.57%, USD/JPY +1.26%, GBP/USD -0.04%, AUD/USD -0.61%, DXY +0.55%, EUR/JPY +0.70%, GBP/JPY +1.38%, AUD/JPY +0.72%.

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• NY opened near 1.1025 after 1.10395 traded overnight, drop then extended

• Big upside beat to jobs data spiked up yields US2YT=RR & the US$

• DE-US 2-yr spreads US2DE2=RR widened sharply; USD/CNH rallied to 7.1036

• Gold XAU= traded lower which reinforced the bid for the dollar

• EUR/USD neared 1.0960, bounced slightly then hit 1.09515 on EBS

• The pair traded down -0.60% late in the day and techs leaned bearish

• Pair held below the 55-DMA & daily cloud top, daily & monthly RSIs falling

• For more click on FXBUZ

Synopsis:

Danske asserts that the market is underestimating the likelihood of a December BoJ rate hike and forecasts a gradual decline in USD/JPY to 133 over the next year.

Key Points:

• December BoJ Hike Outlook:
  Danske argues that the probability of a December BoJ rate hike is underpriced in the current market. They suggest that communication from Japanese authorities may not provide clear hawkish signals until after the upcoming October meeting, especially considering the pending elections and new economic data.

• Focus on US Economic Data:
  While the US labor market data has recently supported a stronger USD, Danske emphasizes that the board is not in a rush to adjust Japanese monetary policy. The performance of the US economy remains a significant factor for USD/JPY dynamics.

• Long-Term Bearish Outlook on USD/JPY:
  Despite the short-term support for USD/JPY, Danske maintains a bearish stance on the currency pair in the strategic horizon. They anticipate a narrowing of yield differentials between Japan and the US, leading to a gradual decline in USD/JPY toward 133 over the next 12 months.

Conclusion:

Danske’s analysis highlights a complex interplay between the potential for a BoJ rate hike and the broader economic context in the US. Their forecast suggests a long-term weakening of USD/JPY, positioning 133 as a target for the coming year.

• Numerous rallies above 1.1200 during August & September were short lived

• No daily closes above 1.1200 were made during that period as well

• Today EUR/USD broke September's low & the psychological 1.1000 level

• That move confirmed that EUR/USD completed a double top pattern

• Completion of the pattern suggests EUR/USD may test 1.0775-1.0800 support

• That target is the measured move from the daily highs to September's low

• Falling daily, monthly RSIs imply downward momentum is now in place

• Move below the daily cloud top & 5-, 21- & 55-DMAs reinforce bearish signals

• For more click on FXBUZ

Synopsis:

BofA anticipates a modest rise in both headline and core CPI for September, indicating firm core inflation without immediate cause for concern.

Key Points:

• CPI Forecasts:
  BofA predicts a 0.1% m/m increase in headline CPI and a 0.3% m/m rise in core CPI. The anticipated decline in energy prices is expected to soften the headline print, while sticky rents and rising used car prices will contribute to a firmer core reading.

• Year-over-Year Expectations:
  On a year-over-year basis, BofA expects the headline CPI to drop by two-tenths to 2.3%, with core CPI remaining stable at 3.2%. The headline NSA index is projected to print at 314.827.

• Core PCE Implications:
  Based on these CPI forecasts and trends in inflation for PPI components of PCE, BofA projects core PCE inflation at 0.18% m/m. While this would be a positive result, it does not signal a drastic change in inflation dynamics that would influence the size of the next Fed rate cut.

Conclusion:

BofA suggests that while inflation continues to trend in the right direction, the upcoming CPI report will likely not alter the Fed's course significantly. The findings support the potential for further rate cuts but do not warrant alarm regarding inflation levels at this time.

• AUD/USD fell to a 10-sesison low after US Sept payroll reports

• US yields US2YT=RR,US$ rallied as Fed's cut pace may be slower

• AUD/USD pierced the 23.6% Fib of 0.63485-0.69435, 21-DMA

• Up trend line off August's low was also pierced before bounce ensued

• Falling daily, monthly RSIs imply downward momentum is in place

• Close below the up trend line may lead to a deeper AUD/USD drop

• For more click on FXBUZ

Synopsis:

Credit Agricole warns that the GBP may face further downside as investors take profits on long positions, particularly in light of upcoming UK economic data.

Key Points:

• Impact of Incoming Data:
  The quality of forthcoming UK data, especially GDP numbers for August, is expected to be a critical driver for FX markets. Investors will closely monitor these figures to gauge the relative policy outlook of the Bank of England (BoE) compared to other central banks, such as the Federal Reserve.

• Recent Economic Trends:
  Recent downward revisions to past GDP growth figures, alongside signs of stagnation in the UK economy during June and July, heighten concerns about the economic recovery. Any further indication that the BoE's restrictive policy stance and the Labour government's planned fiscal austerity are stalling growth could negatively affect GBP sentiment.

• Market Reactions:
  If the UK rates market shifts towards a more dovish outlook for the BoE, this could lead to increased vulnerability for GBP, particularly as investors may look to take profits on their long GBP positions.

Conclusion:

Credit Agricole suggests that the GBP's outlook remains precarious, with potential downside risks as profit-taking on long positions intensifies. The upcoming GDP data will be pivotal in shaping market sentiment and influencing expectations regarding BoE polic.

Synopsis:

CIBC notes that the robust September jobs report eliminates concerns from a weak summer job market, setting the stage for a modest 25bps rate cut in November.

Key Points:

• Employment Growth:
  The September jobs report revealed an impressive increase of 254K jobs, significantly surpassing the consensus estimate of 150K. Additionally, there were substantial upward revisions of +72K for the previous two months.

• Unemployment Rate:
  The unemployment rate declined to 4.1%, better than the expected 4.2%, while the participation rate remained steady at 62.7%.

• Wage Growth:
  Wage growth accelerated to 0.4% month-over-month, slightly above consensus expectations, further indicating strong labor market dynamics.

• Implications for Rate Cuts:
  This overwhelmingly positive report positions a 25bps rate cut as the most probable outcome for the Federal Reserve's November meeting. While another jobs report will arrive before the meeting, the overall strength of the September data, combined with upward revisions, has shifted expectations toward more aggressive front-loading of cuts.

Conclusion:

CIBC concludes that the strong September jobs report alters the Fed's rate cut trajectory, favoring a conservative approach with a likely 25bps reduction in November. However, market participants should remain attentive to future job reports and potential revisions that could impact this outlook.

• Cable rises to 1.3174 on relatively hawkish guidance from BoE's Pill

• Pill urges caution on BoE rate cuts after Bailey suggested faster pace

• 1.3174 is around 23.6% Fibo of 1.3434 (last week's 30-month high) to 1.3093

• 1.3093 was Thursday's three-week low (after 1.5 cent fall on dovish Bailey)

• UK construction PMI 57.2 vs 53.3 f/c. US Sept jobs report due at 1230 GMT

• NFP f/c 140k (Reuters poll); jobless rate f/c 4.2%. NFP beat might boost USD

• FX volatility is gauged by implied volatility to determine FX option premium

• Risk reversals gauge which direction is likely to generate most volatility

• They show implied volatility premium for strikes in that direction vs other

• EUR/USD benchmark 1-month 25 delta favoured downside strikes until mid Aug

• Turned to topside for first time since 2022 when EUR/USD reached 1.1201

• Was unable to sustain topside premium, despite another 1.12+ test in Sept

• EUR/USD has subsequently fallen back to the lower 1.1000's

• 1-month risk reversals regain highest downside strike premium since July

• Implied volatility flags NFP and U.S. election FX volatility warnings

For more click on FXBUZ

• Traders are betting EUR/USD rises but pair now dropping

• Rally failed at 1.1214 ahead of important upside levels

• Since trading 2024 peak pair has dropped to 1.1008 in just 6 days

• Gambling is a popular past time but most gamblers lose

• Traders have taken the long odds by betting on a break

• Bookmakers look set to win with EUR/USD returning to neutral level

• Mid-point of this year's range is 1.0908

• FX markets could turn ugly nL1N3LG06U

• Huge 0.6850 option expiry anchors AUD/USD before US jobs report at 1230 GMT

• The size of the strike for the 10am ET NY cut is A$1.58 billion

• Sept NFP f/c at 140k: beat might boost USD. US jobless rate f/c at 4.2%

• 0.6830 was AUD/USD one-week low Thursday, after US ISM services index beat

• AUD/NZD up to 1.1035 (7-week high) on scope for 50 bps RBNZ cut next week

• Citi went long AUD/NZD last week; target 1.12 (1.1156 was 21-month July top)

• Cable eyes 1.3150 after pushing its recovery envelope from 1.3093

• 1.3093 was Thursday's three-week low, after 1.5 cent fall on dovish Bailey

• Bailey says BoE could become 'more aggressive' on rate cuts nL1N3LF04T

• BoE's Pill due to speak at 0755 GMT (Pill voted against BoE's Aug rate cut)

• GBP/USD resistance levels beyond 1.3150 include 1.3173 and 1.3200

• US jobs report due 1230 GMT; NFP f/c 140k. US port strike ends nL1N3LG036

• Sterling's three-day slide halted at 1.3093 Thursday

• Mild corrective action early Friday

• A minimum adjustment of the 1.3434-1.3093 drop is at 1.3173

• Damage to short-term 1.3003-1.3434 bull trend but longer-term trend intact

• Friday risk remains skewed to the downside with studies not yet over sold

• We will monitor price action on any stronger rebound

• GBP/USD trader TGM2338

  For more lick on FXBUZ

• AUD/USD bobs higher to 0.6845 from open 0.6840; neutral

• Tad above Thurs close, but US NFP ahead instils caution

• Bollinger uptrend channel entrance at 0.6884 to cap intraday

• 21 DMA support at 0.6794 will attract bids, reinforcing 0.6800

• Light bullish action seen as Asia equities risk-on resumes

• HK-listed China stocks roar back, Hang Seng last +2.0%

• For more click on FXBUZ

• +0.05% in a 1.3123-1.2136 range with occasional flow on LSEG FX Matching

• Dovish BoE Bailey surprised, will BoE chief economist Huw Pill agree?

• Construction PMI leads UK event risk, then the often volatile US payrolls

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

• 5, 10 & 21 DMAs crest/fall - this week's dip leaves a negative setup

• Thursday's 1.3093 low then 1.3002 Sept low and 0.382% Apr/Sep rise support

• 1.3229 5 & 21 DMAs then Thursday's 1.3285 high are initial resistance

• A close below 1.3000 would be a strong bearish signal for next week

For more click on FXBUZ

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

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