FX OVERVIEW
Policy divergence is the main driver: resilient US jobs data reinforced expectations of Fed tightening, while the BoJ’s hawkish turn and New Zealand’s political clarity supported the yen and kiwi. The dollar’s support from rate expectations was partly offset by reduced geopolitical risk and competing demand for safe havens.
MAJOR PAIRS
AUDUSD — The pair remains under pressure as NZD strength weighs on the AUD, despite a brief rebound from a seven-month low on dip-buying and softer USD momentum. The bias remains bearish below 0.7039 resistance; a break below 0.6833 would reopen downside.
AUDNZD — The kiwi’s political tailwind pushed the cross toward 1.2300, with 1.2265–1.2270 marking key support at the lower end of its recent range. A sustained break below that zone would extend the bearish AUD trend.
USDCHF — US jobs strength helped lift the pair toward 0.8210, but easing Iran concerns reduced the dollar’s defensive appeal while safe-haven demand supported the franc. The near-term bias is bearish below 0.8205 resistance, with 0.8110 the cited downside target; a break above 0.8205 would challenge that view.
EURUSD — The euro recovered toward 1.1160–1.1200 on lower oil prices, easing geopolitical concerns and somewhat firmer ECB signals, but strong US payrolls and Fed-hike pricing cap the move. A sustained break above 1.1200 would strengthen the recovery case; a fall below 1.1150 risks a move toward 1.1100.
GBPUSD — The BoE’s 25bp hike supported sterling, but cautious guidance and dovish remarks from officials blunted the boost. Trading near 1.3385, the pair remains below its 100-day average at 1.3395; 1.3355 is near-term support, with 1.3225 in view if it breaks.
NZDUSD — The kiwi outperformed on political clarity after preliminary results showed Prime Minister Christopher Luxon’s coalition retaining a narrow majority, reinforcing expectations of an inflation-focused RBNZ. The bias is bullish while that policy outlook holds, though mixed China data remains a risk.
USDCNY — The PBOC set the central rate at 6.7188, slightly weaker than Friday’s 6.7168, signaling tolerance for gradual yuan depreciation amid external pressure. The move supports a modestly higher USDCNY bias.
USDJPY — The pair remained range-bound between 157.97 and 158.53, capped by the 158.68 200-day moving average as expectations of a potential December BoJ hike supported the yen. The bias is bearish below that average, with 156.96 support; a break above 159.04 could trigger a short squeeze.
CENTRAL BANK WATCH
- BoJ: A potential December rate hike and the prospect of a longer tightening cycle supported the yen.
- BoE: The Bank raised rates 25bp to 4.00% in an 8–1 vote, but Governor Andrew Bailey’s caution and dovish commentary from Deputy Governor Catherine Mann weakened confidence in further hikes.
- ECB: President Christine Lagarde struck a slightly hawkish tone, while other national central-bank signals were more dovish. The ECB was reported to be holding rates at 2.5%, balancing inflation against weak growth and financial conditions.
- RBNZ: New Zealand’s election result reduced perceived risk of a shift back to a dual inflation-employment mandate, supporting expectations that policy will remain focused on inflation.
- Fed: Strong payrolls—165,000 versus 65,000 expected—and a 4.1% unemployment rate reinforced expectations of further tightening, with markets reportedly assigning an 80% probability to a December hike.
MACRO DRIVERS
- US labor-market resilience supported Fed tightening expectations and limited broad dollar weakness.
- Easing US-Iran tensions lowered oil prices, reducing inflation concerns and trimming some of the dollar’s defensive premium.
- Japan’s policy outlook and potential portfolio rebalancing supported the yen as a hedge amid AI-related volatility.
- New Zealand’s political clarity boosted the kiwi and widened its relative advantage over the Australian dollar; the PBOC’s slightly weaker fix pointed to gradual yuan depreciation.
POSITIONING IDEAS
-
Bullish
- NZDUSD — Political stability supports expectations of an inflation-focused RBNZ.
- USDCNY — The weaker PBOC fix points to tolerance for gradual yuan depreciation.
- EURUSD above 1.1200 — A sustained break would support the undervaluation-driven recovery case.
-
Bearish
- USDJPY — A hawkish BoJ outlook and failure to clear the 200-day average at 158.68 favor yen strength.
- AUDUSD and AUDNZD — Kiwi outperformance is pressuring the Aussie; 1.2265–1.2270 is the key AUDNZD support test.
- GBPUSD — The BoE hike is offset by cautious forward guidance, with the pair below its 100-day average.
- USDCHF below 0.8205 — Reduced geopolitical risk premium and franc demand favor downside toward 0.8110.