GBPUSD TECHS: Short-Term Bear Cycle Intact

RRP usage slips to $19.416B with 20 counterparties this afternoon from $20.997B last Friday. Compares to $17.923B on Wednesday, Sep 3 - the lowest levels since early April 2021. This year's high usage of $460.731B occurred on June 30.

• The Japanese yen was the main focus across G10 currency markets on Monday, following the resignation of PM Ishiba and the associated sharp initial negative reaction at the open. USDJPY gapped higher from last Friday’s close around 147.40, swiftly erasing the post payrolls decline to trade as high as 148.58. Resistance in USDJPY at 148.78, the Aug 22 high, remains intact for now.
• Thatcherite MP Sanae Takaichi is a front-runner among many opinion polls to takeover, having previously made clear her preference for easy monetary policy and a bigger role for fiscal spending - reminiscent of the Abenomics policy set from 2012 - 2020. Markets have subsequently calmed, and USDJPY tracks back towards 147.75 ahead of Tuesday’s APAC crossover.
• Overall, weaker-than-expected US employment data continues to keep the risks tilted towards the weaker dollar narrative, emphasised by the USD index spending today’s US session consolidating close to six-week lows. Associated strength in G10 has been led by the likes of AUD and NZD, while political risks in France may have contained the EURUSD price action somewhat.
• The NZDUSD (+0.65%) rally places a clear focus on 50-day EMA resistance (intersecting today at 0.5921), a breach of which would counter the most recent bearish theme. Furthermore, spot has also closed in on 0.5944, short-term trendline resistance drawn from the July 01 high. Further gains would target the August 13 high at 0.5996.
• Tuesday’s calendar will be centred around the preliminary annual payrolls benchmark revision, which is widely expected to imply large downward revisions to nonfarm payrolls growth through the twelve months to March 2025. SNB Chairman Schlegel will also participate in a fireside chat titled "Future-proofing central banks" at the BIS Innovation Summit, in Basel.
• Focus this week remains on the US inflation picture, with PPI and CPI prints due on Wednesday and Thursday respectively.

In headlines that were very much expected, PM Bayrou has lost a confidence vote in parliament.

"*FRENCH PREMIER BAYROU LOSES CONFIDENCE VOTE IN PARLIAMENT" - bbg

• France is “drowning in a tide of debt,” Bayrou told lawmakers Monday ahead of the vote. “You have the power to bring down the government but you don’t have the power to erase reality.”
• As noted earlier, French PM Francois Bayrou told the French National Assembly that lawmakers can vote "according to their conscience" today in a no-confidence vote that was expected to result in Bayrou being ousted.
• Betting markets lean slightly towards snap legislative elections, despite Macron ruling the option out and the risk of further gains for the far-right National Rally.
• Defence Minister Sebastien Lecornu is favoured to replace Bayrou if elections are not called.