US TSY FLOWS: BLOCK - Ultra Likely Buyer

Goldman Sachs: "USD: Tariff trial run. In a busy week, reports about China policymakers considering a weaker Renminbi in response to potential tariffs offered the most revealing price action. CNY-sensitive currencies fell, the Euro showed notable underperformance, and the Yen strengthened even more than the Dollar. While we did not think the report contained anything surprising, and even aligned with our forecasts, this “trial run” strengthens our confidence that tariffs cannot be fully priced ahead of time given CNY's central role, and we still think there would be broad reverberations across currency markets despite the substantial moves over the last month. In the meantime, we continue to see some downside risks to the Dollar after a strong run heading into next week’s FOMC meeting. We expect the Committee to continue to stress two-sided risks to the outlook, which could come as some surprise to the market which has recently shown less concern about softening labor market demand than earlier in the year. That said, we think it is revealing that the FX market was willing to look through a less forceful ECB delivery and instead had an outsized response to the strong US NFIB sentiment. We take this as a sign that the market is more focused on the forward, and the potential for more divergent outcomes ahead, which should lower the bar for the FOMC as well. If the “dots” show a higher terminal rate, that should limit the scope for Dollar depreciation. This would be particularly true in rates-sensitive crosses, including our preferred expression to be long USD/SEK, where we also expect the Riksbank to deliver another rate cut despite firmer inflation data. This type of balanced message would also likely help push USD/JPY gradually higher still" 

J.P. Morgan: "Pushbacks and questions on the 2025 outlook
Outlook: We remain bullish USD but it has been rangebound for the last month and investors seem divided on how aggressive policy could be, so we review the key pushbacks and questions on our 2025 Outlook. European pessimism isn’t well priced in our view. Watch Monday’s PMI. Risks to USD from US yields into the FOMC are mitigated by JPY and CHF longs. USD/CAD can test 1.50 if the US and Canada enter a trade war. EUR/CHF below 0.90 in Q1 despite 50bps SNB rate cut. Out-of-consensus BoJ hike call would support JPY. Norges Bank and Riksbank contrast, long NOK/SEK. BoE on-hold, but quality of GBP carry falling as UK growth weakens.

Macro Trade Recommendations: Stay long USD & short EUR as the election trade is not finished. Other macro themes include services/mfg r.v., policy r.v., EUR-specific weakness, flows r.v. and ongoing carry rotation. Short EUR vs USD, JPY, CHF, Scandis. Long NOK vs SEK, GBP, PLN. Short CHF/JPY, hold CAD/JPY put spread.

Emerging Markets FX: Challenging outlook for EM FX, although technicals argue for patience in adding to bearish positions, so stay neutral. Bearish CNY, THB, SGD, COP, PLN, CZK; Bullish TRY, ILS, INR.

FX Derivatives: CAD/JPY and USD/JPY digi puts look attractively priced. Zero-cost long/short constructs using JPY correlations offer leverage against EUR and CNH. Consider “zero-carry” long Yen delta exposure via partially delta-hedged risk-reversals. Buy 2M one-touch USD/CAD calls.

Technicals: Look for more EUR/USD consolidation after the Sep-Nov slide. GBP/USD range trading below key levels just above 1.28. USD/JPY tracks DM yields to higher levels; watch for tactical move to fade soon. AUD/USD struggles to find solid ground in the lower end of the 2023-2024 trading range."