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Forex Market Snapshot
Markets are still digesting the Blue Tsunami win in the US midterms, which saw oil crumble, US bond yields fall (flatter curve) and the dollar ease but with limited follow through.
- GBPUSD backed off after another test of 1.35 ahead of the BoE rate decision.
- USDJPY is back above 158 after again finding support below it.
Forex Market Snapshot
The dollar is trading weaker following the Blue tsunami results in the US midterms as risk tone takes a u-turn to the upside. While the dollar is down across-the-board, the JPY is lagging (USDJPY back above 158) as it loses ground again on its crosses. Elsewhere, EURUSD is firmly above 1.12 (1.1250 now pivotal), GBPUSD has sights on 1.35 but so far pausing just below, AUDUSD (an outperfortmer) is back to .7000+ and USDCAD is lower after failing to hold 1.40+
USDJPY 4 HOUR: Underperforms
When you see the JPY over or underperform (in this case the latter), it is generally cross flow driven. In this case, it is either EURJPY or GBPJPY or both that has seen USDJPY test 158.60. Market is having more trouble absorbing the USD buy side. The significance of 158.60 is it’s the last resistance ahead of 159.03, which is the top of the current range where the BoJ may be lurking.
Forex Market Snapshot
The dollar is trading on the firm side after selling following the FOMC saw limited follow through., CHF and JPY lagging as US yields dip along with softer crude oik prices.
- EURUSD:: On the defensive (while below 1.1150) ahead of the ECB decision.
- USDJPY: Bounce off a 157.60 low keeps 158 pivotal amid defense ahead of Friday’s BoJ meeting.
- GBPUSD: Clinging to a bid above 1.33 after a stop run below yesterday failed to follow through.
- USDCAD:: Back to unchanged as focus stays on pivotal 1.40 to set its tone after a bounce from just above its 1.3968 low (near double bottom)
- AUDUSD; Still bid above .7000 but again struggled to hold above .7050
Forex Market Snapshot
EURUSD: Unable to shake a focus from 1.12, currently trading below, as elevated French vs. German bond yield spreads and PMI misses (led by by France) weigh. 1.1150-80 needs to hold to keep the focus on 1.12 and away from the 1.1113 low. Event risk today: Moody’s French credit review (sometme after US markets close)
USDJPY: Remains on the defensive with the focus still on 157 (currently below it) after the overnight plunge paused just above 156. Watch US bond yields for any correlations.
GBPUSD: Retail Sales miss offset by PMI beat. Charts show a lower high off the 1.3419 top, making it dependent on 1.3350-55 holding to keep a bid and prevent down momentum from taking over. Note GBP lagging vs EUR duw to weak EURGBP.
Market Update: Yields slide
US bonds getting a safe haven bid as the lead NAS100 briefly breaks its low, leaving 29K blocking the key level at 28755.
The dollar elsewhere is off its highs as yields slide while USDJPY is off its low (but still well down on the day) after pausing above 156.64 in what should remain defensive trading.
Market Update: Risk off
Stocks tumbling after Meta and Tesla earnings failed to impress, weighing on yields with USDJPY following.
USDJPY currently pivoting 157.00 (low 156.82) with key support at 156.37 the last line of defense before a void on the downside. Upside limited unless 157.50+ is regained.
XAUUSD failing again to catch a safe haven bid with its tumble testing and holding its 4066 low for a double bottom. However, this is so far only offering a respite as back above 4106 is needed to cool the risk.
Market Update: Correlations
Correlation has been weaker stocks (led by NAS) => lower bond yields => weaker USD
Stocks rallying (NAS still below 30K, USA500 back above 7700)Â =< bond yields ticking up (10 year 5.098% vs. 5.038% low)=> modest correlations the other way (EURUSD back to 1.12, USDJPY back above 158)
Market Update: FX tug-of-war
EURUSD (higher on the day but failed in test above 1.12) and USDJPY (bid back above 158 but well below its overnight high) as EURJPY firms but below key resistance (see chart)
With US yields off earlier lows but still down on the day (note bounce in crude), it may be a wait-and see day ahead of tomorrow’s CPI.
USDJPY 4 HOUR: Conspiracy theory
As noted yesterday, the break of a 7 day pattern around 158 would normally be taken as a bullish signal but these are not normal times given the threat of BoJ intervention. Conspiracy theory: If I was the BoJ I would have taken advantage of the dip in US yields and softer USD to give USDJPY a nudge to run stops below 158 (low 157.75).
USDJPY DAILY: Bullish signal?
USDJPY on the verge of breaking a 7-day pattern pivoting 158, which under normal circumstances would send a bullish signal for 159.;03 assuming158.50 is firmly broken. However, these are not normal times given the BoJ intervention threat although a hard sell to traders if the overall USD tone stays firm. In any case, a break of this pattern would be bullish.
USDJPY DAILY: 7 days in a row
Diverging today, down vs. the USD while others trade up, indicating JPY crosses continue to help pin it in a range.
Same chart as yesterday except trade on both sides of 158 extended to 7 days in a row, currently trading above it.
As noted, the longer this pattern goes on the greater the risk of as directional breakout once it is broken.
Market Update: EUR crosses
Worth noting is the FX market is having more trouble absorbing the USD buy side of EUR crosses, both when it was selling off earlier and then a modest bounce a short while ago (e.g. USDJPY bounced above 158).
Next key focus is on the ISM Services PMI, with special attention on the prices paid copmponent.
