FX OVERVIEW
Risk aversion is the dominant driver: the AI- and tech-led equity selloff is supporting safe-haven demand, lifting the dollar and weighing on risk-sensitive currencies, particularly AUD and KRW. Markets are also looking ahead to US payrolls, while central-bank signals are mixed: the BoJ is leaning toward further normalization, but the BoE offered little guidance after its rate increase.
MAJOR PAIRS
AUDUSD — The pair remains in a bearish channel near 0.6880 as risk aversion, weaker Australian inflation and limited RBA tightening prospects weigh on the Aussie. A break below 0.6833 would expose 0.6660; resistance sits at 0.6970–0.7030.
USDCHF — The pair remains range-bound, with USD gains capped at 0.8185 as the franc retains safe-haven support despite weak Swiss consumer sentiment and falling reserves. A break above 0.8217 is needed to challenge the bearish structure; absent that, upside momentum remains limited.
EURUSD — The euro is under pressure as robust US payrolls data and safe-haven demand support the dollar, while weak Eurozone consumption and falling German and French yields offset firmer inflation and a hawkish ECB tone. The pair remains below its 100-day average, with resistance near 1.1255; a break below 1.1132 would put 1.1100 and then 1.0951 in view.
GBPUSD — Sterling has struggled to benefit from the BoE’s 25bp hike to 4%, with the lack of clear forward guidance and weak household spending leaving it vulnerable ahead of US payrolls. The pair is near 1.3425; a strong US jobs print could open 1.3345 and 1.3267, while 1.3372 and 1.3409 are near-term support levels.
USDCAD — The pair is supported by broad dollar demand and safe-haven flows, trading near 1.4073 ahead of US and Canadian employment data. It remains above 1.4000 support; a strong US payrolls result could extend the move toward 1.4167 and 1.4302, though overbought RSI leaves room for a near-term pullback.
USDCNY — The PBOC set a slightly weaker fixing at 6.7168 versus 6.7156, consistent with modest yuan depreciation pressure amid dollar strength and cautious risk sentiment. The bias is higher, with the pace of any further weakening dependent on PBOC guidance and intervention.
USDJPY — The pair remains capped below 158.00 as hawkish BoJ signals and intervention risk constrain dollar-yen upside, while structural Japanese outflows remain a longer-term headwind for the yen. Near-term direction is less clear: a strong US payrolls report could reopen the path toward 161.65, while a downside surprise would likely renew yen support.
USDKRW — Risk aversion and foreign outflows from Korean tech shares are weighing on the won, leaving the pair biased higher despite some support from lower oil prices and Treasury yields. Resilient US payrolls would add to pressure on the won; no specific technical threshold was cited.
CENTRAL BANK WATCH
- BoJ: September minutes signalled openness to further rate increases as inflation approaches 2%. The normalization bias is supportive of the yen, although structural outflows and risk sentiment remain important counterweights.
- BoE: Raised Bank Rate by 25bp to 4%, but Governor Bailey offered little guidance on further tightening. The hike provided limited support to sterling.
- ECB: A hawkish tone and elevated inflation have not translated into euro strength, with weak consumption and falling core-country yields weighing on the currency.
- PBoC: Set the USD/CNY central rate slightly weaker at 6.7168, a modest signal of tolerance for yuan depreciation.
MACRO DRIVERS
- Risk-off flows tied to the AI and tech selloff are supporting the dollar and safe havens while pressuring AUD and KRW.
- Markets are focused on US payrolls as a near-term catalyst for the dollar; the reported strength in recent US employment has supported USD demand, even as December Fed hike pricing has eased.
- Policy signals are diverging: the BoJ is discussing further tightening, while the BoE’s hike came without a clear follow-up path; this has limited the benefit to GBP and kept JPY trading on mixed forces.
- China’s slightly weaker fixing and Korean tech-related outflows point to continued pressure on parts of Asia FX, though the PBOC’s managed-float approach remains a constraint on the pace of yuan moves.
POSITIONING IDEAS
- Bullish
- USDCAD — Dollar safe-haven demand and the risk of a stronger-than-expected US payrolls report support upside toward 1.4167 and 1.4302.
- USDCNY — The weaker PBOC fixing and broad dollar strength support a gradual move higher.
- USDKRW — Tech-sector outflows and risk aversion leave the won vulnerable to further weakness.
- Bearish
- AUDUSD — Risk aversion and weak Australian inflation prospects reinforce the downtrend; 0.6833 is the key breakdown trigger.
- EURUSD — Dollar demand and weak Eurozone consumption keep the pair under pressure; a break below 1.1132 would strengthen the bearish case.
- GBPUSD — The BoE’s limited forward guidance leaves sterling exposed to a strong US payrolls report.
- USDCHF — Failure to clear 0.8217 leaves the pair’s broader bearish structure intact, though safe-haven flows make the near-term bias less decisive.