August 20 (Reuters) - GBP/USD could rise to 1.40 for the first time in more than five years if the deterioration in sentiment towards the dollar deepens into the autumn. The catalyst for the deterioration was the U.S. Treasury's announcement on Wednesday that it would double the size of its U.S. long-bond buybacks. The unexpected news deflated UST yields and spurred selling of the USD – which lifted cable to a three-month high of 1.3630. A prospective cable move to 1.40 could be juiced by more squeezed GBP shorts: CFTC data showed the net GBP short position totalled a still hefty 56,221 contracts in the week ended August 11 (the net GBP short hit a nine-year high of 105,719 contracts in June).

If GBP/USD does rise to 1.40, it would arguably still be "cheap": 1.65 was its approximate average in the 10 years leading up to the Brexit referendum in June 2016.

Related:
GBPUSD


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

• AUD/USD retreated to 0.7103 in Asia on soft Australian jobs data

• Employment unexpectedly fell in July; jobless rate 4.5% vs 4.4% forecast

• 0.7103 is low water-mark since Wednesday's jump to test 0.7129

• USD selling on U.S. Treasury news was catalyst for 0.7129 test

• 0.7129 was Monday's 10-week high (0.7067 was Wednesday low)

• U.S. Treasury's upsized buybacks may complicate Fed's monetary policy work

AUDUSD


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

• EUR/USD rises to 1.1684 on Thursday

• Limit for correction of May-June 1.1794-1.1325 drop is 1.1694

• A rise to May's 1.1794 peak likely on any move beyond 1.1694

• The rally is quite stretched toward peak 20-day Bollingers

• Short squeeze fuelled rise, likely few longs to bar bigger gains

•
EURUSD


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Brokerage Jefferies initiates coverage of Italian cash-for-gold trader Gens Aurea with a "buy" rating, seeing opportunity for consolidation in a highly fragmented market

• It sets an initial PT at €15 ($17.51), implying 56% upside from Wednesday's closing price

• Noting the high fragmentation of the European gold recycling market, the brokerage deems Gens Aurea well positioned to gain market share through superior scale, selective M&A and organic expansion

• "As gold prices rise, the Group passes part of the benefit to customers through more competitive pricing, supporting higher volumes, stronger store productivity and share gains," Jefferies says

• It adds the group offers a lower commodity risk compared to traditional gold miners, thanks to its hedging strategy limiting exposure to its core earnings and valuation from fluctuations in gold prices

• Jefferies is the first broker to initiate Gens Aurea since its Milan bourse debut in July, according to LSEG data

($1 = 0.8568 euros)

(Reporting by Mirko Miorelli)

• GBP/USD consolidates in Asia after closing 0.55% higher on Wednesday

• Boosted by Treasury's support measures aimed at capping long-dated yields

• Supported by lower U.S. yields and receding Fed rate-hike expectations

• Fed July meeting minutes show 'many' officials saw need for a rate hike

• But taken in stride as benign July inflation and jobs data preclude Sep hike

• UK July inflation rises as expected, leaves BoE rate outlook unchanged

• Resistance 1.3650-60, 1.3690-1.3700, support 1.3560-70, 1.3525-30

• Wednesday range 1.3525-1.3630, Asia 1.3597-1.3614
GBP:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

Bank of America Global Research discusses UST outlook.

"US Treasuries remain historically cheap relative to domestic macro fundamentals, with our valuation frameworks continuing to point to attractive medium-term entry levels, and scope for a dip-buying stance," BofA notes.

"However, valuation arguments alone are not sufficient to take stance on duration. The utility of Treasuries as portfolio diversifiers has deteriorated as stock-bond correlations remain near their highest level since the late 1990s. The current valuation discount is likely to reflect this reduced utility, as investors are no longer willing to pay the same premium for duration's traditional hedging properties," BofA adds.

• AUD/USD -0.3% Thur after AU jobs data printed at the low end of forecasts

• AU Jul employment: -15.8k jobs (poll +15k), 4.5% unemployment (poll 4.4%)

• DXY trading near 12-week lows as U.S. Treasury flags increased bond buybacks

• Stalled U.S.-Iran peace negotiations fuels Strait of Hormuz confusion

• RBA Aug monetary policy meeting minutes to be released Tue

• Range Asia 0.71155-28 support 0.6920 0.6866, resistance 0.7130 0.7200
DXY Daily 55-DMA


AUD daily 21/100/200-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• Across the board USD weakness sends USD/JPY back down into 158 handle

• From 159.64, USD/JPY to 158.04 yesterday, Asia so far today 158.03-30 EBS

• Through base of 158.92 daily Ichimoku cloud base, 200-DMA at 158.30

• Maybe in lower range capped @158.60, 158.61 retracement high post fall

• Japanese exporter sales to continue on rallies, absorb importer demand?

• News US Treasury to double long-bond buy-backs impact large, US yields off

• Japan fiscal concerns allayed to extent too as global bonds rallied

• Narrowing trend in JGB-US Treasury rate differentials could thus continue

• As of the New York close, differential in 2s @246.7 bps, in 10s @178 bps

• Fed minutes showed hawkish bias but recent data weaker, view no Sept hike

• Wall Street up as result, Nikkei likely up too, foreign buys/ccy hedges?

• Option expiries today include 158.00-10 $1.9 bln, 159.00 $985 mln

• Related comments , , ,

• Also , on Tsy buy-backs , on US debt

• US markets , , ,

• On Fed minutes , on global bonds

• On Japan's fiscal concerns , for more click on [FXBUZ]

USD/JPY:


JGB-US Treasury 2-year interest rate differential:

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

• USD/THB opens lower, broad USD fall and rally in gold prices weigh

• USD and UST yields tank after Treasury doubles 10/20-yr buybacks

• 10yr UST yield -6bps to 4.64%, 30yr last at 5.18%

• DXY last at 98.82, ranged 98.76-99.69 overnight

• USD/THB traded 32.84-33.08 range in NY, closed at 32.91

• Supports at 3280, 32.60; resistance at 33.0, 33.20

• Oil prices up on escalating tensions in the ME, Brent last $91.85/bbl

• Spot gold rose 4.05% to $4,508.64 an ounce overnight, last at $4510/oz

• Related
THB=

(Catherine Tan is a Reuters market analyst. The views expressed are her own.)

• NZD/USD +1.2% from Wed 0.58605 low as broad USD index hits 12-week low

• UST yields drop on news U.S. Treasury will increase curve control measures

• NZD break of 0.5925-30 resistance zone opens topside potential toward 0.5995

• No progress on U.S.-Iran peace deal leaves Strait of Hormuz in limbo

• Gold +4.3% while Brent crude remains elevated at $91.57 a barrel

• NZ Jul balance of trade update, and Aug S&P manufacturing PMI due Fri

• Range NZ 0.59325-38, support 0.5831 0.5762, resistance 0.5995 0.6090-95
NZD Daily 55-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

Goldman Sachs Research constructed a series of FX factors (Carry, Equity Risk, National Debt, NIIP, Energy and Metals Commodities, and Mean Reversion) by applying time-varying weights to 26 currencies, including the US Dollar.

"We show that this is the case for a Carry/Risk-Off blend during periods of moderate equity drawdowns, and for a Carry/NIIP blend to benefit from capital retrenchment in periods of correlation breakdowns in US assets," GS notes.

"We also find that blending Carry with Mean Reversion can help to improve total vol-adjusted returns," GS adds.

• AUD/USD +0.8% from Wed 0.7067 low after UST yields sank on bond buyback news

• U.S. Treasury to double size of long-date buybacks to increase liquidity

• AU Jul employment data 0130 GMT, poll consensus +15k jobs, 4.4% unemployment

• AUD near upper hourly Bollinger band, upswing may stall ahead jobs data

• Strait of Hormuz uncertainty persists with no signs of peace progress

• Gold +4.3% while Brent crude remains elevated at $91.57 a barrel

• RBA Aug monetary policy meeting minutes to be released Tue

• Overnight range 0.7069-0.7129 support 0.6920, resistance 0.7130 0.7200
AUD Hourly Bollinger Study & DXY daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• NY opened near 0.7075 after 0.7067 traded overnight, rally took hold early

• US Treasury announcement sent yields , down & rallied risk assets

• Gold, silver, copper & equities put in solid gains & USD/CNH fell to 6.7279

• AUD/USD spiked up and pierced the 61.8% Fib of 0.7277-0.6867, traded 0.7129

• USD & yields firmed in NY's afternoon, AUD/USD neared 0.7115 into the Fed minutes

• AUD/USD rallied slightly after the Fed minutes, traded up +0.45% late in the day

• Techs lean bullish; RSIs are rising, ongoing consolidation, hold above 10-DMA are bullish
audusd


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

• NY opened near 1.1605 after 1.1570 traded overnight, rally extended early NY

• USD, US yields fell sharply after US Treasury liquidity support news

• EUR/USD spiked upward as risk-on sentiment dominated early trading

• Gold, silver, stock rallied sharply while USD/CNH fell below 6.7280

• EUR/USD rallied above the 200-DMA, hit a 2-1/2-month high of 1.1677

• USD & yields firmed in NY's afternoon, EUR/USD neared 1.1660 into the Fed minutes

• The USD softened a bit after the Fed minutes, EUR/USD neared 1.1670, was up +0.79% late

• Techs lean bullish; RSIs indicate bull momentum, pair above 200-DMA & June monthly high
eurusd


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

Morgan Stanley Research summarizes its tactical views on AUD and NZD.

"AUD View: Bullish | Skew: Bullish We stay bullish AUD after Governor Bullock's hawkish tone in August. Carry is high, implied vol unusually low and risk appetite firm, so we look for 0.75 in the coming quarters.," MS notes.

"NZD View: Neutral | Skew: Neutral We see AUD/NZD holding near 1.20. Inflation expectations have cooled, and with unemployment rising and a September hike fully priced, we think risks skew lower into card spending," MS adds.

• Ether traded range bound since July 15, today that range broke

• US dollar, yields fell on US Treasury liquidity support news

• Riskier assets rallied sharply; gold, silver, Bitcoin, stocks rallied & USD/CNH fell

• Ether rallied above the 50% Fib of 2464.54-1506.93, July & June monthly highs

• A 3-month high of 2098.10 traded, Ether traded up +7.8% into Europe's close

• The rally helped bullish technical signals emerge for Ether

• 200-DMA broke & consolidation of drop from April high resolved with a rally

• Rising daily, monthly RSIs reinforce bull signs as they indicate upward momentum

• Psychological 2100.00 level & 2135.00-2155.00 zone are immediate impediments for bulls
eth


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

Credit Agricole CIB Research on BoJ rates outlook.

Even if the BoJ raises rates, the yield curve would flatten, but long-term yields will not decline unless the economy deteriorates significantly. If the BoJ hikes in September and October, real GDP growth in 2027 would likely slow further to around +0.5%, in line with potential growth, from +0.8% in 2026. A slowdown in growth would put downward pressure on the yen," CACIB notes.

"It should not be forgotten that even as the BoJ has continued its overeager rate hikes, yen depreciation and rising long-term rates have persisted," CACIB adds.

• Shares of gold miners up, tracking rise in bullion prices [GOL/]

• Spot gold up 2.8% at $4,457.12 per ounce, as the U.S. dollar weakened and global bond yields eased from multi-decade highs

• Top miners Barrick Mining and Newmont up 5.7% and 7.5%, respectively

• U.S.-listed shares of South African miners Gold Fields

rise 6.3%, Harmony Gold jump 7.5% and AngloGold Ashanti gain 6.5%

• Canadian miners Kinross Gold up 6.2% and Agnico Eagle Mines rises 5.8%

(Reporting by Pranav Mathur in Bengaluru)

Goldman Sachs likes buying AUD/USD on dips in the near-term.

"In the context of fiscal concerns, AUD and NOK should find support, but there's a pivot point were this feeds through to lower equities and traditional risk-off," GS notes.

"Alphabet issuance (5.5bn of AUD denominated bonds today) will perhaps prove a slight drag on AUDUSD as some proceeds are converted back into we have seen these patterns before on hyperscaler issuance, and it presents a buying opportunity - between 0.7070 and 0.7040 short term," GS adds.

Bank of America Global Research previews today's FOMC minutes from the July meeting.

"The July FOMC minutes will be stale because the soft July jobs and inflation data since the Fed meeting have considerably reduced market pricing of hikes.

Still, we will be looking to get a sense of how many FOMC participants (besides the three dissenters) wanted a hike or would at least have been willing to go along with one," BofA notes.

"We're also curious about the committee's thresholds for a September move, though we wouldn't expect anything too specific on this front," BofA adds.

• Cable has traded a 40.5 pip range thus far Wednesday; 1.3525-1.35655

• The peak of that range is 5.5 pips shy of Monday's three-month high

• Minutes from July's Fed meeting will be published at 1800 GMT

• Eighty of 104 economists polled by Reuters expect Fed holds through year-end

• UK CPI rose to 2.9% in July, as expected, from 2.6% in June

• Pound can bank on another 6-3 rate hold vote in September

GBPUSD


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

• USD/JPY option gamma bid up and topside strike demand increased as spot tested 160.00 barriers/triggers Monday

• Subsequent spot setback toward 159.00 drained any excitement and volatility measures are back under pressure

• 1-week daily realised volatility has collapsed to 1.32 - the lowest in G10 FX to evidence the recent lack of spot activity

• With minimal daily FX movement, there's no fuel left to keep short-dated implied volatility elevated

• 1-month implied vol back around 7.0 after its late July intervention led spike from 4-year lows at 6.0 to 10.0

• 1-month daily realised vol still includes the intervention spot drop, but will revert lower when it rolls out the equation

• Related comment - Why FX options continue to snooze
1-week and 1-month expiry USD/JPY FXO implied volatility


Implied vs realised vol


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

• USD/JPY has pulled away from the closely-watched 160 level

• Spot has dropped from 159.64 to 159.06, on Wednesday, on the EBS data

• USD/JPY upside has recently been limited by Japanese exporter sales

• A break and daily close below the cloud base, that is currently at 158.92, would be bearish

• USD/JPY and EUR/JPY usually struggles in August

• Investors set sights on Swiss franc for popular carry trades after yen intervention

Daily Chart


(Martin Miller is a Reuters market analyst. The views expressed are his own)

• AUD/USD falls to 0.7067 as Asian stock losses weigh on risk-sensitive AUD

• Kospi down 5.8%, Nikkei down 3.16%; steepest drops for three weeks

• 0.7067 is the lowest level this week (0.7129 was Monday's 10-week high)

• Minutes from July's Fed meeting will be published at 1800 GMT

• RBA's Hauser warns of higher rates if inflation risks crystallise

• Australian July jobs data due at 0130 GMT; employment forecast up 15k

AUDUSD


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