The FX Trader: Currencies can only ignore risk off for so long

Technical and other observations for key pairs.

• Dollar Index – the US dollar is like neutral ether – no impulsiveness in broad terms – waiting for a rally above 100.00 or slide below 99.00 for further steps.
• EURUSD – see Dollar Index above – certainly not the focus for now – waiting for what price action looks like above 1.1670 or below 1.1550.
• JPY pairs – the JPY at the assumed epi-center of any volatility breakout – especially if a steep sell-of bar develops on its own accord in USDJPY without official intervention (which is likely if the rally falters). Alternatively, if the fiscal package uncorks a steep JPY sell-off, the rally in JPY pairs could run into official intervention.
• GBPUSD and EURGBP – if global risk-off funk extends, sterling is usually poorly positioned.
• AUDUSD and AUD – global risk-off, also hitting metals now, is weighing on AUD and the important 0.6450 area.

Next steps
The September US jobs report/nonfarm payrolls change will now apparently be released on Thursday, but will feel like ancient history as we need to know the current dynamics after big October layoffs announced. Today’s weekly ADP payrolls release (for 4-week average private payrolls change through November 1) feels more important. December rate cut odds have dropped to 44%, which seems low.

But really, the focus will be on whether risk sentiment can stabilize and on the JPY dynamics depending on the direction in US yields and sentiment on the fiscal and JGB dynamics in Japan around the announcement of the fiscal package on Friday.

FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.

The JPY remains weak but can’t help it has two-way potential as noted above. Note the AUD momentum cratering on risk-off and metals weakness, as well as CHF safe haven status and indeterminate EUR- and USD-trend readings. SEK and NOK tilting lower again yesterday and overnight on wobbly risk sentiment.

Table: NEW FX Board Trend Scoreboard for individual pairs.

Not much worth noting except that weak risk sentiment is seeing underperformance of pro-cyclical G10 smalls versus the EUR as EURAUD and others are trying to establish fresh up-trends, while EURSEK flip-flops within the range (remember that the dark shading suggests the trend flips if at current prices on the close).