Bank of America Global Research sees three potential bullish USD themes into H2: Middle East tensions (Hormuz), Fed (hawkish), and AI capex (hyperscalers).

"Hormuz Strait: Déjà vu all over again: Middle East tensions are rising, and oil has rallied roughly 20% from the post-MOU lows. While headline ping-pong may continue, there is a sizeable net-short oil position in the market and inventories remain low...," BofA notes.

"Hawkish Fed: Mission not accomplished: We hold a well out-of-consensus Fed call, still seeing scope for 3 hikes this year. Chair Warsh has recently reasserted his commitment to 2% inflation, and while June CPI came in soft, it will take several more like-prints to confirm a trend...

Hyperscalers: Do believe the hype: Finally, we see the AI theme as a net-positive for the USD, with ongoing cap-ex likely to keep relative growth supported," BofA adds.

• EUR/USD traded 1.1460-1.1476 ovenright, NY opened near 1.1465, up +0.02%

• Balanced risks helped keep the range tight and consolidate recent gains

• Firm US yields , drop in gold helped limit EUR/UDS's topside

• Oil drop, USD/CNH's slip from its high, EUR/JPY gains buoyed EUR/USD

• EUR/USD hugged the down trend line off the May 11 high ahead of US data risks

• June retail sales, weekly jobless claims & July Philly Fed are due in NY's morning
eurusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• AUD/USD fell in Asia, traded 0.7011-0.6986, buyers then emerged

• The pair neared flat into NY's open and traded near 0.7005

• Lift ensued despite firm US yields & gold, silver drops

• USD/CNH fall from its 6.7721 high & copper gains helped lift AUD/USD

• AUD/USD rallied back above the down trend line off the May 13 high

• A daily long legged doji formed which suggests bulls have the advantage

• June retail sales, weekly jobless claims, July Philly Fed are data risks
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• Deutsche Bank note EUR/CHF gained 3+% since Mid-East conflict prompted SNB to lean against CHF strength

• SNB now more willing to intervene on FX to curb excessive franc gains

• CHF's safe-haven, equity-hedge traits appear to be fading

• CHF beta to global equities is near zero, even in elevated risk periods

• CHF now increasingly driven by global rates, not risk sentiment

• Yield differentials now the key CHF driver going forward, Deutsche Bank argue
EUR/CHF=EBS


(Richard Pace is a Reuters market analyst. The views expressed are his own)

The market looks quiet. That's exactly the problem.

EUR/USD option implied volatility is stretched to the downside, with little scope left to fall much further.

Across the curve, 1-week through 1-month tenors are pinned on a 4-handle — 2026 lows — and 1-month implied is sitting just a few ticks above the multi-year trough of 4.5 struck back in December.

Other expiry dates are already testing prior multi-year lows.

For anyone still short volatility at these levels, the calm is a trap.

With implied already compressed near historic floors, there's only so much further it can realistically grind lower, capping the reward for sellers.

Meanwhile any pickup in volatility, even a modest one from a fresh macro catalyst or headline surprise, could quickly erase whatever thin premium has been banked.

Given these are short-vol positions, that downside is technically unbounded.

Limited reward, open-ended risk: a combination that typically discourages fresh vol-selling once implied has fallen this far, even without an obvious near-term catalyst for a reversal.

But there's a flipside to this same trap, and it's a far more welcome one — for a different type of market participant entirely.

Falling implied volatility is, above all, a story about the cost of protection.

Implied vol is the single biggest driver of an option's premium, so when it's sitting near multi-year lows across G10 — as it now is — the price of hedging future FX moves gets cheaper right along with it.

For corporates and real-money accounts looking to lock in future rates via optionality rather than a forward, this is about as attractive a window as we've seen in years. Of course, a low volatility environment is also good news for FX carry traders, as depressed volatility and the seasonal lull combine into a classic carry-friendly setup.

That's the split personality of the calm trap. For the vol seller, depressed implied levels mean a poor asymmetric bet — capped upside, uncapped downside.

For the hedger buying protection, that same depressed level simply means cheaper insurance.

One side's snare is the other side's opportunity — and right now, EUR/USD sits squarely in between.

Related comments - FX options send an unambiguous post-CPI signal

Cheap FX hedges, costly assumptions
EUR/USD FXO implied volatility


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• 1.3520 is low water-mark for cable since Wednesday's surge to 1.3556

• Surge to 1.3556 (nine-week high) aided by short-covering on UK political news

• UK's incoming PM Burnham to name Mahmood as finance minister, FT reports

• Ed Miliband had been hoping to get the job. Burnham takes charge on Monday

• UK faces £330 billion fiscal problem, think tank says. British Steel nationalised

• UK GDP up 0.1% in May, as forecast. 1.3500 is now a GBP/USD support point

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

July 16 (Reuters) - Bitcoin, which has halved since the boom that took it above $126,000 last October, has barely moved since February. But, given its highly speculative nature, it is still a good way to gauge risk appetite, making it a handy tool for equity traders whose markets have ballooned or currency traders who have adopted a very defensive stance in spite of the stock market boom.

It's unlikely that both positions — one extremely positive and the other very negative — will be maintained together for long. And bitcoin, which is sitting just above very important levels, may provide some insight as a lead indicator.

The situation looks quite bearish. Once steeply oversold conditions, which halted the October 2025 to February 2026 decline toward $60,000, were alleviated, bitcoin fell further, reaching slightly below $58,000 in June. The lack of a bounce from the low during another oversold situation is a worry, heightening the risk of another drop.

Should the 55-WMA at $89,087 fall below the 100-WMA at $88,425, the sell signal it provides could spark a drop. And should the most widely watched cryptocurrency sink below $57,783, which is 61.8% of the rise from 2023's low near $15,000 to the record high above $126,000, the resulting risk aversion for all cryptocurrencies could influence a broader paring of risk.

Gold stole the headlines when bitcoin slumped last year, rallying over $1,600/oz, likely with traders switching wagers from bitcoin. But it has surrendered all of those gains and also stands just above key levels that, if broken, could trigger a purge of bullish wagers from speculators who have been buying heavily from $4,500 down.

This could force traders to cash in highly profitable equity wagers to fund losses on cryptocurrencies and precious metals. That, in turn, could support the dollar — though the haven buying already seen in 2026 may act as a restraint on further gains for the greenback.

Alternatively, if bitcoin weathers the storm of an imminent sell signal and gold holds around $4,000/oz, currency traders won't need to maintain their defensive stance and may reduce their wagers. Their selling would weigh on the dollar, providing the stimulus — a weaker USD effectively eases U.S. monetary policy — needed to lift bitcoin and gold clear of nearby supports, creating a platform for the resumption of the bull trends that have excited so many traders in recent years.(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Shares of Australia's Flynn Gold rise as much as 4.8% to A$0.022, hitting its highest levels since June 19

• Stock on track to clock its third consecutive session of gains, if trend holds

• Mineral exploration co says drilling results at its Firetower project in Northern Tasmania confirm gold-tungsten mineralization

• Adds, drilling also found high-grade copper within the gold-tungsten zone, expanding scope of project

• Near 5.2 million shares change hands, 11.8x the 30 day average

• Stock down 8.3% YTD, including session's moves

(Reporting by Shravya Marakini in Bengaluru)

• USD/JPY 162.03-16 EBS in Asia, in stasis around 162.00 again

• USD off elsewhere but yen still under pressure

• US-Iran, summer carry interest, Japanese importer and retail demand cited

• Renewed Japanese flows into foreign bonds too on suspected carries

• FinMin Katayama again spoke out against weak yen, threatened action

• Ex-BOJ Adachi also flagged BOJ policy rate hike to maybe 1.75% in 2027

• That said, poll showed Japanese firms hurting from higher rates

• USD/JPY daily Ichimoku tenkan 161.99, underlying support at 161.17 kijun

• 162.04-07 hourly Ichimoku cloud support or pivot? 100/200-HMAs 162.07/13

• Massive option expiries today between 161.0095, at 162.00, 162.40-163.00

• EUR/JPY off from 186.00 EBS high overnight, Asia 185.84-99

• On hold above hourly Ichimoku tenkan at 185.68, kijun at 185.62

• CHF/JPY 200.90-201.55, 201.28-202.16 daily cloud, 201.49 100-HMA to cap?

• GBP/JPY holding bid, 219.12-58, holding just under 219.60 high yesterday

• Likely to remain bid on feel-good effects of coming new UK Cabinet

• NZD/JPY also better bid, 94.55-94 in Asia on carry interest

• Underlying support at 94.56 hourly Ichimoku kijun, tenkan 94.75

• AUD/JPY buoyant too but less than NZD/JPY, Asia 113.22-64, o/n high 113.68

• Attempting to break clean above 112.13-113.45 daily Ichimoku cloud

• Related comments , , also

• On MOF/ex-BOJ-speak , flows
USD/JPY hourly:


GBP/JPY hourly:


NZD/JPY hourly:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• Shares of Australia's Kaoko Metals rise as much as 4.9% to A$0.535, their biggest intraday pct gain since July 3

• The diversified miner says initial samples from its Karibib project confirms presence of copper, gold and tungsten

• Project located in Namibia, Southern Africa

• Including the day's moves, stock up over 47% since its IPO in early-May

(Reporting by Shravya Marakini in Bengaluru)

• Australian copper miners fall in early trade, while the broader benchmark trades little changed

• Copper prices edged lower overnight after disappointing economic data from top metals consumer China, though supply concerns due to mine disruptions and the Gulf conflict helped limit losses [MET/L]

• Sandfire Resources falls as much as 2% to A$18.64

• Capstone Copper's Australia-listed shares lose as much as 3.8% to A$13.27, posting their largest intraday pct drop since July 8

• Capstone's ASX stock among top losers on AXJO
(Reporting by Nikita Maria Jino in Bengaluru)

• USD/JPY fell back some on broad USD weakness last night, Asia 162.03-14 EBS

• Again a matter of stasis and equilibrium around 162.00?

• US-Iran war, Japanese importer and retail demand, carry interest supportive

• Specs also not backing away from yen shorts as desired by Japan's MOF

• Short JGB-US Treasury rate differentials narrower but wider on long-end

• Threat of Japanese FX intervention remains, to continue to limit upside

• Technically, USD/JPY around 161.99 daily Ichimoku tenkan, kijun 161.17 below

• Hourly Ichimoku cloud a line at 162.04, spot holding just above

• Ascending 200-HMA 162.12 and descending 100-HMA 162.08

• Option expiries 161.00-95 $2.8 bln, 162.00 $1.1 bln, 162.40-163.00 1.7 bln

• Prognosis for more stasis around 162.00 barring fresh news?

• Related comments , , ,

• And , also , on US-Iran ,

• US markets , , ,

• On the Fed , , US PPI
USD/JPY daily:


USD/JPY hourly:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• USD/CNH sagged to 6.7684 Wed, likely to head lower still

• Bearish cues align as 21, 55 DMAs both turning south

• Bollinger downtrend channel in effect, capping at 6.7792

• US producer prices surprisingly fell in June

• Data tanked UST yields, weighed on USD broadly, lifted stocks

• China bank lending disappoints on weak demand
CNH


(Ewen Chew is a Reuters market analyst. The views expressed are his own.)

Morgan Stanley Research preview the UK monthly GDP print due on Thursday.

"In may we see some slowdown in momentum in manufacturing, with ICT and hospitality countering the boost to services sector growth from strong retail sales," MS notes.

"With this, our forecast for 3M/3M growth comes in at 0.5%Q. We continue to tracl 2Q26 GDP growth at 0.2%Q," MS adds.

(Fixes typo in bullet 3)

• GBP$ surged higher, up 1.23% at 1.3550 in NorAm afternoon; Wednesday range 1.3552-1.3382

• US PPI confirmed current dip in inflation, which has weighed on UST yields & Fed policy tack

• Report Burnham selecting fiscally conservative Hm Sec Shabana Mahmood as FinMin aided rise

• Market had been wary Burnham would select Ed Miliband seen more fiscally expansive as FinMin

• Sterling considerable spec short vs USD likely unwinding as catalyst for move higher

• GBP$ res 1.3552 Wed high, 1.3600 psychological lvl, 1.3658 daily high May 1

• Supt 1.3500 big-figure support, 1.3437 daily cloud top, 1.3381 Wednesday low

Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

• NY opened near 1.1420 after EUR/USD moved downward in Asia & Europe's morning

• The pair hit 1.1406 in early NY trading but buyers emerged & a rally followed

• US PPI downside surprise sank the USD and US yields

• US-DE spreads tightened; gold, equities gained & USD/CNH fell

• EUR/USD rallied above Tuesday's high, broke the trend line off the May 11 high

• 1.1475 traded in NY's afternoon, EUR/UD was up +0.48% late in the day

• Rising daily, monthly RSIs & pair's hold above the 10- & 21-DMAs are bullish signs
eurusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• NY opened near 0.6985 after 0.6972 traded overnight, the pair's rally extended

• Downside surprise to US June PPI sent USD, US yields

lower

• Gold , equities rallied & USD/CNH fell towards 6.7665

• AUD/USD broke the trend line off the May 13 high, hit a 3-week high

• The pair traded above 0.7015 in NY's afternoon, AUD/UDS was up +0.58%

• Techs lean bullish; trend line break, rising daily, monthly RSIs are bull signs

• AUD/USD's hold above the 10- & 21-DMAs adds to the bullish signals
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Citi discusses the scope for Japanese pension funds to repatriate investments.

"As hinted by Finance Minister Satsuki Katayama last week, the Takaichi government may be considering a change to the policy mix portfolios of the GPIF and other public pension funds. This is no surprise given the government's efforts to defend the JPY and the overall direction of its economic policy. However, given the relationship with the US, a large-scale change that could adversely impact overseas markets would be difficult, at least in the near term," Citi notes.

"More likely is an incremental approach that makes use of the allowances for deviation from the basic portfolio, in our view. Corporate pension funds are unlikely to directly follow the lead of the GPIF but could well increase investment in Japanese bonds over time given the recent rise in yields. This should provide some support to the JPY in the forex market," Citi adds.

• USD/JPY stalls ahead of the cycle high (162.84) once again

• With both CPI and PPI now leaning softer, USD momentum on the topside should fade

• Pullbacks remain shallow, underlying bid supported by persistent carry demand across JPY crosses

• Cross-JPY strength continues to provide a floor for USD/JPY, limiting downside follow-through

• However, with spot firmly in intervention territory, appetite for a sustained topside break remains constrained

• Resistance seen at 162.84 - a move through 163 would materially increase asymmetric risks of a sharp pullback

• Initial support at the 200-hour MA cluster (162.07)

• Break below exposes the post-U.S. CPI swing low at 161.60

• Deeper support seen at 160.70
USDJPY daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

Goldman Sachs Research on revising its EUR/USD and USD/JPY forecasts.

"For much of the past few months, we have said that economic trends should support the Dollar against low yielders on a tactical horizon, and revised our forecasts in that direction in mid-March. We increasingly think these forces look likely to linger for longer, and we are unlikely to return to broad-based, sustained Dollar depreciation for some time," GS notes.

"To reflect an ongoing divided Dollar environment, we are revising our forecasts for EUR/USD to 1.14, 1.12 and 1.12 in 3, 6 and 12 months (from 1.14, 1.18 and 1.20 previously). We have also revised our forecast path for USD/JPY to 162, 163 and 165 (from 160,158 and 155 previously)," GS adds.

Sterling's near-term bias remains tilted higher after Wednesday's below-forecast U.S. PPI reinforced Tuesday's soft CPI, signaling — at least for now — that U.S. inflation has resumed its descent toward the Fed's 2% target and reviving expectations for lower U.S. rates.

Despite the favorable backdrop for the pound, traders remain cautious, keeping GBP/USD within its recent range of 1.3276-1.3452, albeit near the top of that band. The reluctance to push the pound higher stems from concerns that the current inflation data does not yet reflect the recent surge in oil prices, which have rebounded from mid-$60s to around $80 per barrel amid escalating U.S.-Iran tensions.

Also supporting the pound is the unwinding of sizeable GBP/USD net speculative shorts. With UK political and fiscal concerns abating and U.S. rate-cut expectations firming after the inflation data, traders are trimming heavy short exposure, preferring to lighten risk as summer liquidity thins.

Technically, GBP/USD meets initial resistance at 1.3437, the daily cloud top repeatedly tested of late, ahead of 1.3452, the July 10 high. A close above 1.3452 opens the way toward 1.3504/09, the May 25/26 highs, and — should global inflation genuinely ease further — bulls will target 1.3658, the May 1 high. Supports sit at the July 8 low of 1.3323 and the range base near 1.3276, leaving cable poised near range highs as markets await confirmation that disinflation can withstand rising energy costs.
Sterling Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Danske Research opened a short EUR/USD position in its recommendation portfolio.

"Yesterday, we recommended a short EUR/USD spot position (with a target of 1.1100, stop-loss 1.1550), which admittedly did not get the best possible start after the US June CPI surprised to the downside on a broad basis (core CPI 2.6% y/y, cons. and Danske 2.8%). Core goods inflation recorded its second negative m/m reading in a row, while both housing and non-housing services inflation cooled as well. Markets erased most of the pricing for a July hike, and we maintain our base case for the first hike in December," Danske notes.

"Nevertheless, EUR/USD reversed most of its initial rise later on as Kevin Warsh underscored that the reading did not signal 'mission accomplished' for the Fed during his testimony for the House financial services committee. Goolsbee echoed Warsh's sentiment later by saying that he 'never wants to overreact to one month [of data]' even if the reading was 'surprisingly benign'," Danske adds.

Bank of America Global Research examines the potential implications of portfolio rebalancing by Japan's public pension funds.

"We do not take a view on whether such rebalancing will occur, nor on its scale or direction. However, given higher JPY yields, the yen's decline to date, and recent remarks by Minister Katayama, markets have begun to contemplate the possibility of a shift from foreign assets into domestic assets, particularly in the fixed income space," BofA notes.

"Should such a rebalancing occur, additional demand from public pension funds would place downward pressure on JGB yields, especially in the 10-20yr sector. In FX markets, the impact would be yen-positive for several months, especially against EUR in case of a shift from foreign bonds to domestic bonds. Lower foreign asset holdings would reduce the absolute size of future rebalancing flows in the future, marginally weakening their volatility-suppressing effect on FX markets," BofA adds.

• AUD/USD traded 0.6972-0.6993 overnight, NY opened near 0.6985, up +0.11%

• Balanced risks helped keep the range tight & consolidation to begin

• Rally in AUD/JPY and equities helped underpin the gains

• Firm USD, US yields & drops in gold, silver, copper limited the gains

• Rising daily, monthly RSIs & AUD/USD's hold above 10- & 21-DMAs are bull signs

• The pair does remain below the down trend line off the May 13 high however

• US June PPI & July NY Fed manufacturing survey are data risks in NY's morning
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)