I receive bank research each day...
I'll drop some of their comments here/
Euro
Citi: EUR trades marginally below overnight highs around 1.1730 at the time of writing (-0.1% in Asia). As a reminder, CitiFX Strategy still believes the EURUSD correction has room to go and it is not yet time to fade it. Several factors, including a slightly less dovish Fed, derisking into US elections, and USD positioning all support this thesis. Strategy is still structurally bullish EURUSD but prefers to add longs on a deeper correction towards 1.14.
JPMorgan: No real reason for the move higher yesterday and it was a little strange when you consider that stocks and commodities were lower on the day. But the head scratching wasn’t confined to EURO, where EM which ignored the positive risk rally on Monday, chose to rebound into midday, before retracing somewhat. The random price action could be a result of Month/Quarter end flow and while I have no insight into whether this is indeed the reason or not, this afternoon is likely to be volatile as the story plays out. O/N the Biden/Trump presidential debate was at times farcical, as both candidates thought the way to make an impact was to name call and see who could shout the loudest. While there was no clear winner, Biden’s betting odds widened by 7% points and the Election remains his to lose. While Biden extended his lead, it was clear that Trump is unlikely to go quietly, meaning a contested election is still very much a concern for markets. But with polls suggesting that 87% of Americans have already made up their minds on how they will vote, these debates may be nothing more than a 3 part Comedy drama. Watch the wires for headlines as Lagarde and Lane are due to speak at today’s ECB watchers Conference and Brexit discussions continue. Mnuchin and Pelosi also continue to talk although an agreement still feels unlikely. All of this may be insignificant, if the much anticipated Month/Quarter end flow dominates proceedings as expected this afternoon. We had been tactically short EUR/USD but are now playing things very close to home, as we try to navigate the potential volatile moves this afternoon.
ING: EUR: All eyes on Lagarde USD weakness helped EUR/USD yesterday absorb the new of a possible delay in the EU Recovery Fund as some countries look determined to use the veto if the rule-of-law conditions are not dropped. Today, the pair appears more vulnerable, also due to some potential Brexit spill-over. President Lagarde’s comments will be closely watched amid rising speculation over a rate cut.
Danske: Although EUR/USD is again on the rise, sentiment across inflation expectations, equities and credit continue to appear weak, and it is, in our view, too early to call off further downside in the pair. Indeed, to the extent that the Danish experience with new COVID-19 lockdowns is anything to go by in a broader context, it is worth noting that consumer spending (card and mobile payments data) are starting to show signs of weakness. We still view EUR/USD as rangebound with risks tilted to the downside towards 1.16 near term. What could make us change this view? Progress on Brexit (watch for whether 'tunnel' negotiations are reached this week), a 'clear' US election outcome and thus a US fiscal boost, and/or central banks renewing their reflation vows. Today watch for ECB speakers at the Watchers conference and for Fed minutes for any hints on the latter, although we think it is too early for a major shift on either side of the Atlantic.
GBP
Citi: GBP mirrors AUD movement, trading down -0.2% to 1.2840 at the time of writing. After the London close, headlines on Bloomberg emerged that the EU has rebuffed a new round of UK proposals on state-aid rules.
“The British offer still doesn’t go far enough, according to two officials in Brussels, who said insufficient progress has so far been made for the talks to head into the intense final phase, known as the tunnel, at the end of this week.”
Talks will continue before a meeting on Friday between chief negotiators Barnier and Frost, where yet another round of talks could be proposed to iron out remaining differences, should no breakthrough be found this week. CitiFX Strategy’s Adam Pickett outlines expectations here: Nothing new from Brexit and BoE headlines.
Also note that the EU’s deadline for changes to the UKIM Bill is today – infringement proceedings against the UK are expected to start on October 1.
JPMorgan: Choppy day for sterling yesterday in which we saw much of Monday’s strength reverse as talks continue in Brussels, the highlight of the day were reports that the UK had sent 5 draft legal texts including one on state aid i n an effort to advance the talks however subsequent reports had European sources saying that the proposals did not go far enough and that insufficient progress has been made to enter the tunnel phase. Flows were pretty light although the HF sector did turn to small net sellers tempering the exuberant run (4 sessions) of net buying into the talks. The IMB meanwhile trundles on clearing the HoC hurdle and now moving to the House of Lords in which it should fail –what follows is then an iterative process between the two houses after a few rounds of which Johnson will be able to force it through anyway –developments here are unlikely to impact negotiations this week. The situation will remain opaque and will be punctuated by brief noises in either direction –our overarching suspicion is that political leaders will need to get involved to agree on the thornier issues and thus the tone could take a turn for the worse into the end of the week. As such we remain in tactical mode here as we end the teeth of month and quarter end rebalancing today. 1.2780/90 remains supportive ahead of 1.2740/50 (0.9115/20, 0.9065/70 EURGBP) while 1.2880/85 remains resistance with 1.2930 above (0.9165/70, 0.9220/25 EURGBP).
Lloyds: The rally from 1.2675 has backed away from 1.2935/45 resistance. A move through there opening an extension towards 1.3010/50 with a break there suggesting 1.2675 was a meaningful low. A slide back through 1.2805/1.2780 support would suggest the rebound from 1.2675 is merely another correction risking another test lower to the 1.26-1.25 region. Longer term, we are biased that the bear cycle from the 2007 and 2014 highs completed with a major ‘double bottom’ in the 1.15-1.14 region. However, we are monitoring the current pullback closely and watching 1.25 and 1.20 key supports.
USD
Citi: Month-end: CitiFX Quant’s preliminary estimates have also suggested that USD pressure should prevail. The sharp losses in equities in September leads the asset rebalancing model to suggest a rotation into equities from bonds with a moderately strong signal at +0.8/-0.7 historic standard deviations respectively. The FX impact of the signals is likely to be USD buying, with the signal significant by historic standards (over 2 standard deviations).
JPY
JPMorgan: Biden seemed to hold his own as Trump turned the debate into chaotic theatre and while Biden’s advantage in betting odds has grown ~7% overnight it is also becoming clearer that Trump will not go quietly, the risk of a contested election is very real and probably rising –as such risk is trading on a softer footing for now. However price action today will be increasingly hard to put into context as we have month/quarter end to deal with –USDJPY was pretty bid in Tokyo into Japanese half-FY and go to be touching resistance at 105.75/80 yet again before risk turned, this will be a focal point today should the implied rebalancing (from MTD stock divergences) come to pass. We are looking to sell USDJPY further onto a 106 handle today if we get the chance, through105.75/80, 106.50/60 is the next level above, meanwhile 105.20/25 remains solid with 104.85/90 below.
I'll drop some of their comments here/
Euro
Citi: EUR trades marginally below overnight highs around 1.1730 at the time of writing (-0.1% in Asia). As a reminder, CitiFX Strategy still believes the EURUSD correction has room to go and it is not yet time to fade it. Several factors, including a slightly less dovish Fed, derisking into US elections, and USD positioning all support this thesis. Strategy is still structurally bullish EURUSD but prefers to add longs on a deeper correction towards 1.14.
JPMorgan: No real reason for the move higher yesterday and it was a little strange when you consider that stocks and commodities were lower on the day. But the head scratching wasn’t confined to EURO, where EM which ignored the positive risk rally on Monday, chose to rebound into midday, before retracing somewhat. The random price action could be a result of Month/Quarter end flow and while I have no insight into whether this is indeed the reason or not, this afternoon is likely to be volatile as the story plays out. O/N the Biden/Trump presidential debate was at times farcical, as both candidates thought the way to make an impact was to name call and see who could shout the loudest. While there was no clear winner, Biden’s betting odds widened by 7% points and the Election remains his to lose. While Biden extended his lead, it was clear that Trump is unlikely to go quietly, meaning a contested election is still very much a concern for markets. But with polls suggesting that 87% of Americans have already made up their minds on how they will vote, these debates may be nothing more than a 3 part Comedy drama. Watch the wires for headlines as Lagarde and Lane are due to speak at today’s ECB watchers Conference and Brexit discussions continue. Mnuchin and Pelosi also continue to talk although an agreement still feels unlikely. All of this may be insignificant, if the much anticipated Month/Quarter end flow dominates proceedings as expected this afternoon. We had been tactically short EUR/USD but are now playing things very close to home, as we try to navigate the potential volatile moves this afternoon.
ING: EUR: All eyes on Lagarde USD weakness helped EUR/USD yesterday absorb the new of a possible delay in the EU Recovery Fund as some countries look determined to use the veto if the rule-of-law conditions are not dropped. Today, the pair appears more vulnerable, also due to some potential Brexit spill-over. President Lagarde’s comments will be closely watched amid rising speculation over a rate cut.
Danske: Although EUR/USD is again on the rise, sentiment across inflation expectations, equities and credit continue to appear weak, and it is, in our view, too early to call off further downside in the pair. Indeed, to the extent that the Danish experience with new COVID-19 lockdowns is anything to go by in a broader context, it is worth noting that consumer spending (card and mobile payments data) are starting to show signs of weakness. We still view EUR/USD as rangebound with risks tilted to the downside towards 1.16 near term. What could make us change this view? Progress on Brexit (watch for whether 'tunnel' negotiations are reached this week), a 'clear' US election outcome and thus a US fiscal boost, and/or central banks renewing their reflation vows. Today watch for ECB speakers at the Watchers conference and for Fed minutes for any hints on the latter, although we think it is too early for a major shift on either side of the Atlantic.
GBP
Citi: GBP mirrors AUD movement, trading down -0.2% to 1.2840 at the time of writing. After the London close, headlines on Bloomberg emerged that the EU has rebuffed a new round of UK proposals on state-aid rules.
“The British offer still doesn’t go far enough, according to two officials in Brussels, who said insufficient progress has so far been made for the talks to head into the intense final phase, known as the tunnel, at the end of this week.”
Talks will continue before a meeting on Friday between chief negotiators Barnier and Frost, where yet another round of talks could be proposed to iron out remaining differences, should no breakthrough be found this week. CitiFX Strategy’s Adam Pickett outlines expectations here: Nothing new from Brexit and BoE headlines.
Also note that the EU’s deadline for changes to the UKIM Bill is today – infringement proceedings against the UK are expected to start on October 1.
JPMorgan: Choppy day for sterling yesterday in which we saw much of Monday’s strength reverse as talks continue in Brussels, the highlight of the day were reports that the UK had sent 5 draft legal texts including one on state aid i n an effort to advance the talks however subsequent reports had European sources saying that the proposals did not go far enough and that insufficient progress has been made to enter the tunnel phase. Flows were pretty light although the HF sector did turn to small net sellers tempering the exuberant run (4 sessions) of net buying into the talks. The IMB meanwhile trundles on clearing the HoC hurdle and now moving to the House of Lords in which it should fail –what follows is then an iterative process between the two houses after a few rounds of which Johnson will be able to force it through anyway –developments here are unlikely to impact negotiations this week. The situation will remain opaque and will be punctuated by brief noises in either direction –our overarching suspicion is that political leaders will need to get involved to agree on the thornier issues and thus the tone could take a turn for the worse into the end of the week. As such we remain in tactical mode here as we end the teeth of month and quarter end rebalancing today. 1.2780/90 remains supportive ahead of 1.2740/50 (0.9115/20, 0.9065/70 EURGBP) while 1.2880/85 remains resistance with 1.2930 above (0.9165/70, 0.9220/25 EURGBP).
Lloyds: The rally from 1.2675 has backed away from 1.2935/45 resistance. A move through there opening an extension towards 1.3010/50 with a break there suggesting 1.2675 was a meaningful low. A slide back through 1.2805/1.2780 support would suggest the rebound from 1.2675 is merely another correction risking another test lower to the 1.26-1.25 region. Longer term, we are biased that the bear cycle from the 2007 and 2014 highs completed with a major ‘double bottom’ in the 1.15-1.14 region. However, we are monitoring the current pullback closely and watching 1.25 and 1.20 key supports.
USD
Citi: Month-end: CitiFX Quant’s preliminary estimates have also suggested that USD pressure should prevail. The sharp losses in equities in September leads the asset rebalancing model to suggest a rotation into equities from bonds with a moderately strong signal at +0.8/-0.7 historic standard deviations respectively. The FX impact of the signals is likely to be USD buying, with the signal significant by historic standards (over 2 standard deviations).
JPY
JPMorgan: Biden seemed to hold his own as Trump turned the debate into chaotic theatre and while Biden’s advantage in betting odds has grown ~7% overnight it is also becoming clearer that Trump will not go quietly, the risk of a contested election is very real and probably rising –as such risk is trading on a softer footing for now. However price action today will be increasingly hard to put into context as we have month/quarter end to deal with –USDJPY was pretty bid in Tokyo into Japanese half-FY and go to be touching resistance at 105.75/80 yet again before risk turned, this will be a focal point today should the implied rebalancing (from MTD stock divergences) come to pass. We are looking to sell USDJPY further onto a 106 handle today if we get the chance, through105.75/80, 106.50/60 is the next level above, meanwhile 105.20/25 remains solid with 104.85/90 below.
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