Overview: The US dollar is little changed against most of the G10 currencies as the North American session is about to get underway. There were some follow-through greenback gains after yesterday's advance but limited. The dollar's rally against the yen continued. It reached almost JPY157.80 before pulling back to around JPY157.10, where it found support in Europe. Yesterday's FOMC minutes seemed to raise the hurdle to a rate cut next month, and this coupled with Nvidia's earnings and guidance helped set today's tone.
Equities soared in the Asia Pacific region. Taiwan's market led the way with a nearly 3.2% gain and the Nikkei rallied 2.6%. Only Chinese stocks, both on the mainland and in Hong Kong fell. Europe's Stoxx 600 is snapping a five-day drop and is up almost 0.80% in late European morning turnover. US index futures point to a gap higher opening on Wall Street today. A large fiscal package by Japan continues to weigh on JGB yields. The 10-year yield rose five basis points today. European yields are slightly firmer, except for Gilts, which are virtually flat. The US 10-year Treasury yield is little changed around 4.13%-4.14%. Gold is softer, near $4065, while January WTI is consolidating below $60, which is where the 20-day moving average is found.
USD: The Dollar Index rose by about 0.65% yesterday, its largest increase since late September. More notable, it settled above the 200-day moving average for the first time since early March. It edged a little higher today but did not quite make it, though, to the month's high, which was near 100.35. Beyond that, the next important technical target is around 101.55, the (38.2%) retracement of this year's decline. Belatedly, the September jobs report will be released today. The median forecast in Bloomberg's survey projects a 55k increase (22k in August). Private sector payrolls are seen rising by 68k (38k in August), even though the ADP estimate was for a loss of 29k. The unemployment rate expected to be steady at 4.3%. Governor Waller's argument for another rate cut next month is that the labor market has stalled, while the weakness has not shown fully in the data, and he wants to look through the tariff increase in some goods prices. Employment data is generally regarded as a lagging indicator, and even more so now with the September figures. Therefore, barring a significant surprise, it is not clear that the data will change many minds either in the markets or at the central bank.
EURO: The euro slid to slightly below $1.1520 yesterday, a nine-session low, and in the process took out the (61.8%) retracement of the leg up from earlier this month. Follow-through selling today took it to $1.1510. The $1.1500 level is key now. There are 2 bln euros of options expiring there today and another 1.4 bln euro option that expires tomorrow. The price action weakened the technical condition, and the momentum indicators are threatening to turn lower. The five-day moving average, which had crossed above the 20-day moving average last week for the first time since late September, is now poised to move back below it. The low earlier this month was about $1.1470. The previous low was in late July/early August, slightly below $1.14, which is where the 200-day moving average is now found. Ahead of tomorrow's preliminary November PMI, the eurozone reported September construction output. It fell by 0.5%, but Q3 was flat, making it the first quarter this year it has not fallen. Still, with Q3 GDP in hand, the impact on markets and the central bank is minimal.
CNY: Consistent with its broad gains, the dollar rose for the fourth consecutive session against the offshore yuan. It briefly poked above CNH7.12 and settled above the 20-day moving average (~CNH7.1160). The CNH7.12 area, which was briefly frayed today, corresponded with the (61.8%) retracement of this month's dollar decline. The next level of chart resistance is seen around CNH7.1275. The firmer greenback saw the PBOC raise the dollar's reference rate (CNY7.0905 vs. CNY7.0872 yesterday). It was lifted for the third consecutive session, matching the longest streak since April. As expected, China's loan prime rates were held steady at 3.0% for the one-year tenor and 3.5% for the five-year loan. The rates were shaved by 10 bp once this year; in May after being cut twice for total of 35 bp last year. Critics of China want to it stimulate domestic demand and significantly strengthen the yuan simultaneously. And it is not simply to stimulate domestic demand that is being demanded but that it buys more of the world's goods, despite large parts of the world, including the US, Europe, and Japan, applying export controls to the PRC.
JPY: The dollar rose to around JPY157.20 in North America yesterday. It extended the gains seen in Europe after a quiet drift lower in the local session. It reached JPY157.80 today before steadying. The high for the year was recorded on January 10 near JPY158.90. The 2024 high was closer to JPY162. For the first time in a little more than a month, the dollar settled well above the upper Bollinger Band (found ~JPY156. to85day). The yen's weakness is beginning to impact expectations for the Bank of Japan. After eight consecutive days of falling, the swaps market increased the odds slightly of a BOJ hike next month from slightly below 30% to slightly more than 33%, but it has fallen to a new low near 20% today, despite comments from a BOJ official who seemed to suggest a December hike should not be ruled out. The US 10-year premium over Japan was about 358 bp in mid-January, the year's high and late last month, it recorded the year's low near 230 bp. It is now near 232 bp. It had not been lower since April 2022. Japan's 30-year bond yield will post its sixth consecutive rise this year. It passed the 1% yield mark in 2022 and the 2% yield mark in 2024 and the 3% yield mark this year. Nearly every threshold that was crossed brought out pundits claiming that a threshold was crossed and Japanese investors would stop exporting their savings. Through last week, Japanese investors bought more foreign bonds this year than last year (JPY268 bln) weekly average vs. an average of JPY117 bln in the same year ago period). Japanese investors also bought foreign equities this year (JPY171.5 bln weekly average) after being net sellers in the same period last year and in 2023. In summary, the weekly MOF data shows Japanese investors exporting a weekly average of about JPY440 bln of their savings this year after buying an average of almost JPY67 bln a week of foreign bonds and stocks in the same 2024 period.
GBP: Sterling peaked last week near $1.3215 and has not looked back. It has recorded lower highs since last Thursday's high, but yesterday the floor gave way. It held above last Thursday's low, near $1.31 but was driven through yesterday to reach almost $1.3050. A marginal new low was recorded today slightly below $1.3040 before recovering to new session highs near $1.3085. The month's low was set November 4-5, near $1.3010. Recall that the (50%) retracement of this year's rally is about $1.2945. The UK economic calendar is between yesterday's CPI and tomorrow's retail sales and preliminary November PMI. The swaps market is discounting almost an 88% chance of a cut a BOE rate cut next month, up around 2/3 at the end of last month. A cut would bring the base rate to 3.75%. The swaps market sees scope for one more cut in the cycle and about a 40% chance of another before the end of next year.
CAD: Even with a 0.4% loss yesterday, the Canadian dollar was among the strongest G10 currencies. The greenback still made a marginal new eight-day high yesterday near CAD1.4065, which is holding so far today. The CAD1.4075 area corresponds to the (61.8%) retracement of the US dollar pullback from CAD1.4140, the seven-month high recorded earlier this month. Recall that halfway mark of this year's range is about CAD1.4165. Canada reports October industrial product and raw material prices today. Neither captures the attention of the market. October CPI was reported on Monday, and the 0.2% month-over-month rise translated into a 2.2% year-over-year pace. The swaps market not only thinks that the Bank of Canada's easing cycle ended last month, but almost a 25% chance of a hike inQ4 26 is being discounted.
AUD: The Australian dollar recorded yesterday's low after European markets closed near $0.6450, its lowest level since October 17 and took out the 200-day (~$0.6460) moving average on an intraday basis for the first time here in H2 25. It is trading in narrow range today of roughly $0.6470-$0.6490. There are options for A$735 mln at $0.6500 that expire today. The October lows were in the $0.6540-45 area. A break could risk a move toward $0.6400, which the Aussie, which is roughly the (38.2%) retracement of this year's rally and ahead of which found support in July and August. The highs for the year were recorded on September 17 (Fed Day) slightly above $0.6705. Since then, it has had three multi-day rallies that stalled at progressively lower levels. The momentum indicators are turning lower, and the five-day moving average is back below the 20-day moving average.
MXN: The dollar peaked on Tuesday near MXN18.4920 and reversed to finish lower on the day. Follow-through selling yesterday took it to around MXN18.3050 before recovering, and the dollar settle above MXN18.36. It has been mostly confined to a MXN18.33-MXN18.37 range so far today. Recall that last Friday and Monday's lows were in the MXN18.2980-MXN18.3015 area. About $520 mln options at MXN18.30 expire today. A break could spur a move to last week's low (~MXN18.2530) or this year's low recorded on September 17 (Fed Day) by MXN18.20.
Reviewed by Marc Chandler
on
November 20, 2025
Rating:
