US yields and the dollar are still reacting to a blowout average hourly earnings print from Washington Friday, while SEK is in focus as the Sunday election showed less of a political rebellion afoot than many had forecasted.
Article / 04 September 2014 at 15:07 GMT

FX Board: EUR craters on ECB dynamism

Head of FX Strategy / Saxo Bank
By John J Hardy

Major FX developments today

  • Euro uniformly weak on ECB deathblow – further negative rates (though Mario Draghi stated that “this is lower bound”) and ABS purchases already in October. Still, speculative positioning was already very heavy before this move and we have the infamously sticky 1.3000 round level in view now.

  • USD not consistently strong despite robust ISM non-manufacturing data. It trades weakly against AUD and CAD and sideways against JPY. 

  • JPY flat against the USD, as USDJPY awaits the US employment report.

  • Gold underwhelms – one would have thought we would see a bigger rally on the ECB move – still awaiting bigger picture developments worth hanging our hat on. 


The big 1.3000 level in view – tomorrow’s US employment report is key for determining whether the downside can continue in the near term. Next major area lower is the 1.2750 zone from last year.


Source: Saxo Bank


AUDUSD is very strong on the carry trade implications of the ECB’s move today – but still well below the 0.9500 range high and the Reserve Bank of Australia will be leaning hard with every tick higher. Still, the bears got a nasty shakeout as the recent promising sell-off was so brutally reversed. Bears need tactical reversals to get involved again and weaker risk appetite.


Source: Saxo Bank


Potential for a test of 9.02 here if the euro weakness continues – note the 200-day moving average coming in near that level. Still, we do need to see the 9.13 level taken out first.

Source: Saxo Bank

-- Edited by Martin O'Rourke

John J Hardy is head of FX strategy at Saxo Bank
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FX Board for September 4, 2014

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