EUR

There's a cautious tone in the market as traders look for reasons behind recent movements, which are somewhat ambiguous (we all know the market is heated, but why today?!). Non-economic news seems to dominate the current situation, and it's understandable that investors' advantage in the FX markets is diminishing. As a result, while there’s a tendency to step back from a strong dollar perspective (with equally balanced bullish and bearish sentiments, especially in G10), the allure of holding onto EM assets is being slightly challenged this morning, even though growth appears stable globally.

For me, it's essential to adjust positions to navigate through these unpredictable fluctuations. Recently, I've taken a more tactical approach with the dollar; however, I’m currently managing some long positions in euros and shorts in USDZAR, in addition to EURSEK through options (at least I've managed to book some profits on that one last month, which is more than many can say!). My belief remains that the longer the shutdown lasts, the more detrimental it becomes. Fed expectations shouldn't stray too far from their corrective path without supportive data, and growth improvements elsewhere should provide some buffer, even though the price movements have been quite lackluster.

Yesterday, we successfully sold euros as a strategy (unfortunately, I wasn’t involved in that one!) which was absorbed well, but there was no significant rebound. The concern I raised yesterday still lingers: we aren't breaking through any initial resistance levels, indicating a potential for further declines. Therefore, I'm only holding a small long position at this moment (despite saying I would let go last week, the overarching narrative on the European front remains solid and I managed to offset my losses with dollar longs elsewhere, giving me a little leeway to hang onto my position!). Once again, with no new data today, we’re left to observe.

GBP

Anyone hoping for insights regarding the Budget will likely be let down, as Reeves’s speech primarily addressed the context, essentially preempting the unfavorable OBR revisions leaked by the FT last week, while acknowledging the productivity issue (it is definitely not a puzzle). By confirming the leak and using vague political language about the harsh realities related to the manifesto break, she maintained her stance on fiscal rules – unfortunately, there’s not much of significance here. Some slightly positive news emerged overnight regarding a more favorable forecast for the fiscal deficit from the Resolution Foundation think tank (approximately £14bn), which is indeed encouraging. The 0.8750/70 pivot remained strong yesterday amid some limited demand for the pound (1z), while SHF continued to sell (8 out of 9 sessions now) and RM is quiet overall. Although cable reached a new six-month low right after her speech, I still question whether the momentum we've seen this week can be maintained for the next four sessions, so I’ve closed my GBP position from yesterday and am staying tactical. The next support level to monitor is 1.3020/40, while 1.3250 (the previous pivot and 200-day moving average) is now the main resistance.

JPY

The Yen is showing signs of recovery, although the price movements following Thursday's BoJ meeting didn’t initially indicate that the Ministry of Finance was challenging previous trends. The shift was triggered by an overnight report from Jiji indicating that the BoJ is feeling more at ease with the reduced risk of a US slowdown and is giving serious thought to a rate hike in December. It's difficult to assert this confidently, especially since we’ve been in a sort of shutdown well before the last meeting. Perhaps December was always the target, as there was previous guidance suggesting they would contemplate a rate increase before year-end. The rates market appeared relatively relaxed with 15 basis points still priced in, but there was some notable DHF JPY buying overnight as traders had been piling into JPY shorts recently. Moreover, we are beginning to see increasing local interest in purchasing JPY at these price points—while not significant amounts, there are small transactions that are catching my attention. Consequently, I’ve decided to reduce my tactical JPY shorts and remain on the sidelines for now, observing this new flow situation. Initial support is at 153.20/30 with further support at 151.50, while resistance stands at 154.65/80. There are no JOLTS today (apologies for that), so we will need to wait for tomorrow's ADP report.