EUR
There is limited data available, so we should be cautious about what we interpret, as both ADP and ISM indicate there is no panic regarding the economy. US yields have continued to increase, and we’ve seen significant dollar buying again, which logically led to a slight decline over a few sessions. In terms of FX, it seems that equities reacted positively to the shift in betting markets during the Supreme Court hearing on tariffs, where the likelihood of voting in favor of Trump decreased, which helped turn the situation around. Fortunately, an actual decision is not expected soon, so we don’t need to be overly anxious just yet. It’s tough to predict much more than a market lull here, as there is little clarity on the court's decision or the timing for the reopening of the US government.
I’ve maintained my euro and cable long positions. Does this suggest a structural rebound? Probably not; I’m just watching to see if we can hold our current levels. Clearing the initial resistance zones has proven challenging in recent sessions, so until there’s a change, we’re essentially just tinkering around. Personally, I don’t anticipate a BOE cut today. I’ve also reduced my rand holdings as the local situation seems mature and frankly, it has become tedious for me. I remain short on the eursek via options, with local inflation being a factor that supports this position, although it’s not transformative.
The euro appears to be finding some stability, and we’ve been good sellers for several notable real money names emerging, which has resulted in interesting price movements (at least as interesting as the current climate allows!). There’s nothing substantial to report regarding PMI revisions, so there’s little to add to the domestic narrative. We need to surpass the initial hurdle to shift the recent sentiment; I've been surprised by the ongoing weakness and flow, but crossing above 1.1530-40 would provide some encouragement.
GBP
Regarding GBP, with the BoE Monetary Policy Report set for noon, there’s approximately 6 basis points priced in, yet there seems to be a market consensus for a higher probability due to pressure exerted by Reeves in her Budget address on Wednesday. I find it hard to believe the Bank will act preemptively on tough Budget measures given Bailey's previous dismissals. Moreover, PMI revisions were quite positive yesterday, particularly with a strong rise in the employment figure, which will help the MPC feel comfortable waiting until December when they will possess much more data.
As such, I’m content to maintain my modest tactical long positions in cable for today’s meeting. There was another strong day of GBP purchasing from domestic hedge funds yesterday (with a 1z, 3-day streak), and this time they were joined by sovereign wealth funds (1.5z), breaking the selling pattern, though it’s frustrating that there’s still been no movement from the real money segment. The levels are well-known; for the cross, it’s 0.8750/70 and 0.8865/75, while for cable, 1.30 is a significant level on the downside, with interim resistance at 1.3095/00 and a crucial level above at 1.3250/60 (previous pivot and 200-day). Good luck!
JPY
Yields and stocks increased yesterday due to positive data (ISM Services), while the USDJPY and USD movements were underwhelming, similar to the situation following Powell's comments before it surged – FX remains interesting. The 154.35/50 level in USDJPY has held firm like a rock on BoJ day and every day after (forming a quintuple top) and is now a significant risk point for any strategy you may have. To be honest, I'm still uncertain about my strategy; the sidelined approach has proven to be more profitable than my October trades, yet it appears that USDJPY is fatigued once again – I truly wished we had seen local flow persist into something more substantial, but that isn’t currently the case (unfortunately). I'm inclined to lean short, but it’s difficult to categorize it as anything more than tactical for now, given the lack of input from Japan and only uncertainities from the US. When will the shutdown end? What will the data show? What will happen in the Supreme Court, and what implications will that have? Resistance is evident, while initial support rests at 153.20/30 with 151.50 being the next level. The only noteworthy flow observed was offshore corporate JPY supply yesterday.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!