The narrative favors a softer dollar, though progress is slow in a risk-positive environment. The Fed is expected to cut rates again this week, but the U.S. economy remains resilient. Powell may not provide clear guidance on future easing, and the market focus is shifting to a new Fed Chair and next week’s key payroll data. Even if the payroll report lacks decisive signals, the perception that other central banks are done easing supports the growth/carry trade theme. Seasonal constraints limit risk appetite, but setbacks, like Brazil’s recent wobble, haven’t significantly derailed momentum.
Positioning: Favor long Swedish Krona (adding on EUR/SEK spikes), Zloty (protected in EUR/PLN if the dollar rallies), and Rand (supported by gold). Short Yen, as USD/JPY around 154 feels like a reasonable dip. Struggled with short CAD; Canadian labor data surprised positively, but I see better turnaround stories elsewhere. The euro remains the weakest dollar short, with limited market appetite and hedging interest keeping it constrained.
GBP: A quiet start to the week, with focus on the Fed. Market eyes a "hawkish cut" and a potential SEP mess. UK labor data shows mixed signals, with wage growth hitting a five-month high. Sterling shorts remain off the table for now, with resistance at 0.8750 in EUR/GBP and support at 1.3265/75 in GBP/USD.
JPY: USD/JPY continues to rise despite BoJ hike repricing last week. Heavy JPY selling from hedge funds supports the pair, with resistance at 155.50/55 and 157.10/20 above. US data next week could influence further moves.
CHF: EUR/CHF gains persist but chasing the pair isn’t appealing. SNB expected to hold rates Thursday, with a high bar for cuts despite recent inflation surprises. Systematic and HF flows show selling pressure on CHF, while corporates are buyers.
CAD: Canadian labor data surprised with a 53.6k employment gain and a drop in the unemployment rate to 6.5%. Despite the positive data, most gains are part-time, and the participation rate declined. CAD shorts unwound, but I remain cautious on the loonie, using USDCAD topside as a funder for EM FX longs.
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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!