FOREX: USD Recovery Picks Up, Despite JPY Bounce
- USD strength continues to play out across G10 FX, with EUR/USD and GBP/USD both trading with heavy losses - and taking out key support in the process. This exposed fresh levels in the two pairs at: 1.3282, the Aug 6 low for GBPUSD, and 1.1516, a Fibonacci retracement in EURUSD.
- The dollar strength persists across the US government shutdown - but is not a reflection of increased expectations of economic resilience, but may be more a factor of market uncertainty as well as increasing risk abroad - particularly political risk in France and Japan.
- The USD has fast reversed the weakness posted off the early August high - taking out 99.304, the 76.4% retracement for the Aug - Sep downleg in the process. Markets still firmly expect a further Fed rate cut at the next meeting, even without the security of the latest NFP print and as next week's inflation print is likely delayed. Instead, markets remain on watch for private sector labour market and inflation measures.
- JPY underwent a spell of volatility as Takaichi spelt out that her government will not pursue JPY weakness excessively - a comment that helped trigger a sharp - albeit brief - spell of JPY strength. Volumes similarly spiked, with JPY futures trading a cash equivalent of $2bln in just two minutes - easily the best volumes of the week.
- Scandi currencies underperformed. SEK and NOK were the poorest performers on the day, with the looming Verisure IPO a potential trigger - sell-side estimates have gauged as much as €2bln in EURSEK demand set to cross as the IPO settles on Friday.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS: Late SOFR/Treasury Options Leaning Toward Calls, Rate Cuts Cool
Option desks reported mixed SOFR and Treasury flow Tuesday, leaning toward calls even as underlying futures look to finish lower/near lows. Projected rate cuts recede slightly from pre-open (*) levels: Sep'25 at -27.2bp (-27bp), Oct'25 at -45.9bp (-47.3bp), Dec'25 at -67.9bp (-69.2bp), Jan'26 at -79.9bp (-82.3bp).
- SOFR Options:
- -4,000 SFRH7 96.00/98.00 risk rev w/ SFRM7 96.12/98.12 risk rev, both call over 1 total
- 3,000 96.25/96.37/96.50/96.62 call condors ref 96.36
- Block, 6,500 SFRZ5 96.62/96.75 call spds 1.75
- +2,500 SFRM6/SFRU6 97.50/98.25 call spd strip, 18.5
- 2,000 SFRZ5 96.37/96.43/96.50 call flys ref 96.355
- 2,000 SFRZ5 96.25/96.37 call spds ref 96.38
- 2,850 SFRU5 96.00/96.06/96.18/96.25 call condors, ref 95.985
- +5,000 SFRU5 96.00/96.12 call spds, 1.5
- +2,500 SFRZ5 95.81/95.93 put spds, 0.5 vs. 96.35/0.05%
- +5,000 SFRZ5 96.50/96.62/96.75/96.87 call condors, 1.5
- +10,000 SFRU5 95.93/96.00/96.06 call flys, 2.75
- 2,000 SFRU5 95.87/96.00/96.12 iron flys, 4.0 ref 95.99
- Block, +5,000 SFRU5 95.87/95.93/96.00 call flys, 2
- Block, +2,500 SFRU5 96.00/96.12 call spds, 1.25
- Block/screen, +4,000 SFRZ5 96.50/96.62/96.75/96.87 call condors, 1.5
- +6,000 SFRZ5 96.00/96.12 put spds, 1.75
- -2,000 0QU5 97.00/97.50 call spd vs. 2QU5 97.00/97.37 call spds, 2.0 net
- +5,000 SFRU5 96.00 calls, 1.75
- Treasury Options:
- 2,400 TUV5 104.75/105 1x2 call spds ref 104-14.25
- 2,400 FVZ5 110 calls ref 109-29.25
- 2,500 FVV5 109.75 puts, 17.5 ref 109-28.25
- 5,000 TUV5 104.25/104.5 call spds ref 104-14.88
- 5,000 TYV5 113.5/114 call spds ref 113-13
- +2,000 TYV5 111.75/112.75 put spds 13 vs. 113-08.5/0.08%
- +1,500 TYV 112/113 put spds, 15 vs. 113-16.5/0.23%
- +1,500 TUH6 104.62/105.25 call spds, 13.5 vs. 104-14.75/0.20%
EURJPY TECHS: Trend Needle Points North
- RES 4: 177.08 2.000 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 3: 175.43 High Jul 11 ‘24 and a key medium-term resistance
- RES 2: 174.86 1.764 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 1: 173.97 High Jul 28 and the bull trigger
- PRICE: 172.65 @ 17:35 BST Sep 9
- SUP 1: 171.15 50-day EMA
- SUP 2: 169.73/45 Low Jul 31 / 23.6% of the Feb 28 - Jul 28 bull leg
- SUP 3: 168.46 Low Jul 1
- SUP 4: 167.46 Low Jun 23
The trend set-up in EURJPY remains bullish and sights are on key resistance and the bull trigger at 173.97, the Jul 28 high. Clearance of this level would confirm a continuation of the bull phase. Note that moving average studies are in a bull-mode position too, highlighting a primary uptrend. A break of 173.97 would open 174.86, a Fibonacci projection. Key support to watch lies at the 50-day EMA at 171.15.
EURJPY TECHS: Trend Needle Points North
- RES 4: 177.08 2.000 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 3: 175.43 High Jul 11 ‘24 and a key medium-term resistance
- RES 2: 174.86 1.764 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 1: 173.97 High Jul 28 and the bull trigger
- PRICE: 172.64 @ 17:35 BST Sep 9
- SUP 1: 171.15 50-day EMA
- SUP 2: 169.73/45 Low Jul 31 / 23.6% of the Feb 28 - Jul 28 bull leg
- SUP 3: 168.46 Low Jul 1
- SUP 4: 167.46 Low Jun 23
The trend set-up in EURJPY remains bullish and sights are on key resistance and the bull trigger at 173.97, the Jul 28 high. Clearance of this level would confirm a continuation of the bull phase. Note that moving average studies are in a bull-mode position too, highlighting a primary uptrend. A break of 173.97 would open 174.86, a Fibonacci projection. Key support to watch lies at the 50-day EMA at 171.15.
