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By Christopher Romano  —  Sep 21 - 10:00 AM

EUR/USD extended its down trend Thursday, striking a 6-month low after the possibility of the Fed keeping rates higher for longer increased following Wednesday's meeting, and the slide is likely to persist unless key U.S. data indicates the economy is weakening.

The Fed's hawkish dot-plot adjustment and ECB rhetoric indicating rates have peaked -- and the next move is a rate cut -- helped increased the dollar's yield advantage over the euro.
2-year spreads US2DE2=RR widened again Thursday, weighing on EUR/USD.

The dot plot adjustment also helped the U.S. dollar gains against most major and emerging market currencies.

EUR/USD technicals highlight the downside risks.
Falling daily and monthly RSIs imply downward momentum and EUR/USD's hold below the falling 10- and 21-day moving averages add to the bearish signals.

Investors await key U.S. data due over the next two weeks.
August core PCE, September payrolls, manufacturing PMI and services PMI, consumer confidence and University of Michigan surveys will gauge the health of the U.S. economy.

Should the data remain robust, markets will see the Fed as justified in holding rates up, facilitating a dollar rally and potentially a EUR/USD fall below 1.0500.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Sep 21 - 09:50 AM


  • BoJ's Upcoming Meeting: BofA anticipates that the BoJ will maintain its current monetary policy in the September Monetary Policy Meeting (MPM), but suggests traders watch for indications of possible operational adjustments to the Yield Curve Control (YCC) and any shifts in BoJ's broader policy stance.

BoJ's Dilemma:

  • FX Volatility and Intervention: Low FX volatility means the Japanese government is less likely to directly intervene in the FX market, which is typically done to stabilize excessive volatility.
  • Yen Weakness and Monetary Policy: As direct intervention is limited, monetary policy remains one of the primary tools available to counteract yen weakness. The BoJ has been collaborating with the Ministry of Finance (MoF) since around the July MPM to mitigate the yen's depreciation.
  • Challenges with Monetary Tightening: Due to structural issues, including Japan's significant public debt, the BoJ's capacity to rapidly tighten monetary policy is restricted.

Potential Outcomes:

  • Hawkish Tone: BofA predicts that the BoJ might attempt to strike a hawkish tone in the September MPM. They may allow long-term JGB (Japanese Government Bonds) yields to rise by making operational adjustments.
  • Impact on Yen: Despite potential hawkish signals, BofA believes these won't fundamentally address the yen's weakening. With the FX rate now potentially influencing the BoJ's decision-making process, the market might be motivated to short the yen and its duration to gauge the BoJ's response.
  • USD/JPY Reaction: If USD/JPY remains unaffected by potential verbal interventions from the BoJ and surpasses the 150 mark, the risk of a direct FX intervention by the MoF may rise.


BofA suggests that the BoJ is in a tight spot concerning the yen's depreciation. While they might adopt a hawkish tone and make minor operational adjustments, BofA believes this won't fundamentally address the yen's underlying weakness. If the market tests the BoJ by shorting the yen, and USD/JPY breaks the 150 threshold, there could be an increased likelihood of direct intervention by the MoF.

BofA Global Research
By eFXdata  —  Sep 21 - 08:51 AM


  • Reaction to FOMC: The EUR/USD pair faced a decline following a hawkish stance from the FOMC, without an actual surprise hike.
  • FOMC Projections: The projections were more hawkish, with expectations of fed funds at 5.6% by the end of this year and 5.1% by the end of 2024.
  • Market Reaction: The OIS market adjusted its expectations, with the first full cut now anticipated in August 2024.
  • Powell’s Remarks: Jerome Powell maintained a balanced stance, emphasizing data dependency and hinting at the possibility of a higher neutral rate, fueling market hawkishness.

Danske’s Perspective:

  • EUR/USD Outlook: Despite the prevailing USD strength, Danske anticipates potential tailwinds for EUR/USD in the coming month.
  • Supportive Factors for EUR/USD:
    1. Peak policy rates.
    2. Improvement in the manufacturing sector relative to the service sector.
    3. Possible easing of market pessimism regarding China.

Key Implications:

  • For Traders: Traders should monitor developments closely as there might be opportunities for positioning in EUR/USD due to expected tailwinds.
  • For Investors: Investors might want to gauge the short-term movements in EUR/USD, considering Danske’s outlook, while keeping an eye on unfolding macroeconomic scenarios.


Danske envisages a possible supportive environment for EUR/USD in the near term, despite a hawkish hold from the FOMC. They identify potential supportive factors like peak policy rates and improvement in the manufacturing sector, indicating opportunities for traders and investors in the forex market to strategize accordingly.

Danske Research/Market Commentary
By Richard Pace  —  Sep 21 - 06:40 AM

The hard-fought battle for EUR/USD's downside is being compounded by the presence of Reverse-Knock-Out (RKO) options, but how do they work and are they still worth owning?

A regular vanilla EUR put/USD call option gives its holder the right to sell EUR/USD at a set level (strike) and time (expiry) for an up front premium.
That premium is the maximum loss, but the profit potential will increase the further that FX spot is below the strike at expiry.

A EUR put RKO is that same vanilla EUR put but with an attached trigger below the strike.
It maximum profit is therefore restricted to the trigger level, which if touched before expiry - kills the option.
The initial premium on these options is therefore much lower, but would suit those who expect EUR/USD losses to remain slow.

For example - with EUR/USD at 1.0650, a 1-month expiry 1.0650 EUR put option has a premium of 77 USD pips, so a break-even of 1.0573.
However, a 1-month expiry 1.0650 EUR put RKO 1.0500 has a premium of just 5 USD pips - a break-even at 1.0645.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By Richard Pace  —  Sep 21 - 05:35 AM

There's no denying the broad USD strength in FX markets, but there's a reason it's struggling against the EUR and traders should expect that to continue.

Dealers are citing long downside positioning in the FX options market via various exotic type structures opposed to regular EUR put vanilla options.
Reverse knock-outs (RKO's) and regular binary barrier type options are said to dominate.

RKO options offer the holder the right to sell EUR/USD at more favourable and pre determined levels (strike), as long as an attached trigger below the strike has not traded by the option expiry.
Such options will benefit from a slow FX grind in a particular direction.

Binary barriers pay a fixed amount if a pre-set barrier has not traded by expiry.
Both types of options are said to have been plentiful on EUR/USD's downside over recent weeks and would certainly help to explain the slow grind as their downside strikes are defended to keep the options in play.

FX option implied volatility gauges realised volatility expectations - it's certainly been suppressed amid a notable lack of demand or premium for options that would benefit from a bigger and more volatility EUR/USD drop.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By Jeremy Boulton  —  Sep 21 - 05:20 AM

EUR/USD traders know the trend is their friend and they have used it to their advantage, profiting from the rise from 0.9528 in September last year to 1.1276 this July.

What's remarkable about speculation surrounding this trend is that traders began to bet on a EUR/USD rise before it happened.
That's unusual as trends usually see big speculative bets develop that are the basis of reversals.
This is why IMM data is closely watched with big bets seen as reverse indicators.

Not only did the EUR/USD's rise begin strangely, traders also timed their decision to book profits very well, and have done so without changing the trend.

This is remarkable too with traders booking profits on 10 billion dollars worth of a 25 billion gamble since July without EUR/USD reaching the target for a minimum technical correction of its Sep-July rise which is 1.0608.

More remarkable still - EUR/USD failed to meet that same target after it peaked in February and again in April.
The shallow dips that resulted have helped to strengthen bullish resolve.

After successfully taking profits a lot of traders may be seeking opportunities to make more money.
If they stay focused on the trend - they will buy again.

Related comment nL1N3AX0JG

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By Richard Pace  —  Sep 21 - 03:45 AM

Adds link to BoE volatility risk premium on line 1

  • FX options on alert for BoE GBP volatility, albeit lower than Aug/June

  • Traders should be aware of larger FX option strike expiries nearby

  • Shows interest to trade any related FX volatility - can affect price action

  • Those with option exposure typically buy/sell FX around strikes pre expiry

  • Can often limit volatility and draw FX to strikes as expiry draws closer

  • Huge 1.7-billion pounds expire between 1.21300-50 post BoE Thursday

  • Friday has 918-million 1.2250, 1.3-billion 1.2300-50, 1.3bln 1.2425-50

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By Martin Miller  —  Sep 21 - 02:55 AM
  • EUR/USD has failed for 2 days in a row above the tenkan line, now at 1.0694

  • It left large upper shadows on Tues, Wed: signs the upside has been rejected

  • 14-day momentum remains negative, reinforcing the overall bearish bias

  • The tenkan and kijun lines are negative aligned, adds to the downside bias

  • We are short at 1.0710 for a much deeper drop, our stop is at cost

  • EUR/USD Trader TGM2334. Previous update nL1N3AW0FH

  • Where dollar closes this week after the Fed critical nL1N3AW0JQ

Refinitiv IFR Research/Market Commentary
By Richard Pace  —  Sep 21 - 02:50 AM
  • Bank of Japan policy decision due Friday, USD/JPY trades 2023 highs 148.46

  • One might assume more potential for policy tightening or FX intervention

  • FX options recognise the risk but protection premiums much lower than prior

  • Overnight expiry now includes BoJ - Its implied volatility 12.0 to 20.0

  • Premium/break-even 74 to 124 JPY pips - peaked 40 vol/240 JPY pips July BoJ

  • Overnight expiry implied vol premium for JPY calls over puts higher at 3.3

  • However, that USD/JPY downside premium above 10.0 before Mar, Apr, July BoJ

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By Rob Howard  —  Sep 21 - 02:30 AM
  • Cable slid to 1.2305 in Asia amid risk aversion following Fed's hawkish hold

  • 1.2305 is lowest level since April 3. 1.2421 was Wednesday's pre-Fed high

  • Goldman now expects first Fed rate cut in Q4 2024 vs Q2 2024 prior forecast

  • BoE rate verdict 1100 GMT; decision finely balanced after sub-f/c UK CPI

  • GBP/USD might extend south towards 1.22 if BoE opts to hold rather than hike

  • UK borrowing in August 11.6 billion pounds vs GBP 11.3 billion forecast

Refinitiv IFR Research/Market Commentary
By John Noonan  —  Sep 20 - 11:35 PM
  • AUD/USD opened -0.12% at 0.6446 after reversing lower from 0.6510 post-Fed

  • Fed was more hawkish than expected and USD continued rally in Asia nL1N3AV1PG

  • AUD/USD fell to 0.6404 as US yields continued to move higher in Asia nL1N3AX026

  • Heading into the afternoon the AUD/USD is trading around 0.6410

  • The 10 & 21-day MAs converge at 0.6425/30 and close below would be bearish

  • Support is at the double-bottom at 0.6358 with bids around 0.6400

  • The hawkish turn in Fed expectations should keep AUD/USD under pressure

  • Risk assets are under pressure, with the AXJ equity index falling 1.45%

  • For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By John Noonan  —  Sep 20 - 10:55 PM
  • EUR/USD continues to probe lower in wake of hawkish Fed hold nL1N3AW2HN

  • It has clearly broken support around 1.0630 to a low at 1.0617 so far

  • Next support is at the 38.2 of the 0.9528/1.1276 move at 1.0607

  • A break below 1.0600 targets the 2023 low at 1.0516 made on March 15

  • For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By John Noonan  —  Sep 20 - 09:25 PM

The EUR/USD downtrend looks set to accelerate following the more hawkish-than-expected guidance from the U.S. Federal Reserve on Wednesday after it held rates at 5.25%-5.50%.

The market was expecting the Fed's dot plot to show one more 25 basis-point hike in 2023, but most were surprised to see the 2024 projection indicate a fall to 5.10% in 2024 - up from 4.6% in the June outlook.

The Fed projects inflation to ease to 2.60% in 2024, which means the central bank will be effectively tightening monetary conditions next year when measured by the 'real' interest rate.
That revelation puts teeth in the 'higher for longer' narrative, as the Fed's optimistic growth outlook allows it to maintain a tight monetary policy while inflation tracks lower.

EUR/USD was trending lower before the Fed decision, as the five, 10 and 21-day moving averages are in a bearish alignment and tilting lower. The pair reversed lower post-Fed to complete a bearish outside day, fuelling downward momentum.

EUR/USD is testing support at 1.0630-35 in early Asia Thursday and a clean break will target the March 15, 2023 low at 1.0516.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By John Noonan  —  Sep 20 - 09:00 PM
  • EUR/USD testing support at 1.0630/35 after closing at 1.0650

  • More hawkish than expected Fed broadly underpinning USD is early Asia

  • A sustained break below 1.0630 targets the March 15 and 2023 low at 1.0516

  • EUR/USD trend lower is accelerating after bearish outside day

  • USD to remain bid, as Fed mantra higher for longer keeps US yields elevated

  • For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By John Noonan  —  Sep 20 - 07:25 PM
  • EUR/USD opens -0.18% after completing a bearish outside day

  • It traded 1.0737 before a more hawkish than expected Fed hold nL1N3AV1PG

  • US yields and the USD reversed higher while risk assets fell post-Fed nL1N3AW2V3

  • EUR/USD poised to test the Sep 14 low at 1.0632 after a week of stalling

  • A break below 1.0630 targets the 2023 low at 1.0516

  • EUR/USD trending lower with the 5, 10 & 21-day MAs in a bearish alignment

  • Resistance is at the 10-day MA at 1.0691 and the 21-day MA at 1.0747

  • For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By John Noonan  —  Sep 20 - 06:40 PM
  • AUD/USD opens -0.12% after tumbling after the Fed delivered a hawkish hold nL1N3AV1PG

  • It traded as high as 0.6510 prior to the Fed decision

  • Fed was more hawkish than market was expecting and sent US yields higher nL1N3AW2JV

  • AUD/USD price action validates double-top at 0.6522 as key resistance

  • Support is at 0.6431 where the 10 & 21-day MAs converge

  • A close below 0.6430 would likely increase downward pressure

  • Selling rallies with a stop above 0.6525 he favoured strategy

  • For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Sep 20 - 04:00 PM

Bank of America (BofA) anticipates a 25 basis point hike in the Bank Rate by the Bank of England (BoE) to 5.5% in its upcoming meeting. However, BofA is not optimistic about the British pound (GBP) rallying in the near term, especially against the U.S. dollar and some of the commodity-driven G10 currencies.

Key Points:

  • Rate Hike: BofA expects the BoE to increase the Bank Rate by 25 basis points to 5.5%, with no rate cuts predicted before 2025.

  • GBP Outlook: Despite the market already being long GBP, BofA does not foresee a near-term rally for the currency. They identify downside risks mainly against the USD and some commodity G10 currencies.

  • EUR/GBP: BofA predicts that the GBP will trade largely sideways versus the Euro (EUR), given the weak data from both the UK and the Eurozone.

  • Post-Hike Scenario: BofA clarifies that they would not view additional hikes by the BoE as positive for the GBP, due to growth concerns. However, they acknowledge that markets have typically seen this differently.

  • Year-End Forecast: Relative to their central bank outlook, BofA sees downside risks to their year-end forecast of 1.24 for GBP/USD, but remains more comfortable with their 0.85 EUR/GBP forecast.


For Forex Traders:

  • Trading Strategies: Given the anticipated rate hike and current market positioning, traders may want to exercise caution when betting on a GBP rally, especially against the USD and commodity-driven currencies.

For Policy Analysts:

  • Rate Policy: BofA’s expectation of no rate cuts before 2025 indicates confidence in the BoE's tightening cycle, contrasting with a more cautious outlook for the GBP.

For Investors:

  • Currency Risks: Those with exposure to GBP may need to reconsider their positions, particularly in pairs like GBP/USD, where downside risks are highlighted.

The Takeaway:

BofA expects a rate hike from the BoE but does not foresee a robust performance for the GBP in the near term. The bank identifies specific downside risks against other currencies, suggesting that traders and investors should adjust their strategies accordingly.

BofA Global Research
By Randolph Donney  —  Sep 20 - 03:35 PM
  • USD/JPY trades wild 148.17-7.48 range pre-Fed, back by highs afterward

  • Fed met hawkish hold policy expectations, Tsy ylds and prices rebounded

  • If 148 is closed above, 21- and 30-day Bolli are next at 148.64/46

  • Two-yr Tsy yields made new 2023 and post-GFC highs after Fed events

  • Fed now slightly favored to hike again by Jan, 63bp of cuts by end 2024

  • The 161.8% Fibo target off July's base is at 149.55 on EBS

  • Beyond that are 150 big fig, 10-week BB & 2023's channel top at 150.23

  • BoJ and Japan CPI on Friday amid uncertainty re MoF intervention

  • US and Japanese officials' comments may raise bar for MoF FX intervention

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By Paul Spirgel  —  Sep 20 - 02:45 PM
  • GBP$ soft, post-Fed, ending NorAm -0.15% at 1.2373; NY range 1.2421-1.2352

  • Fed keeps rate steady, eyes 1-more hike in 2023; dot-plot higher; Powell

  • Rally above 1.24 after lower UK CPI faded on less-dovish Fed rate outlook

  • Sterling recovery from post-CPI slide on shaky ground nL1N3AW16B

  • With Fed behind us GBP traders prep for BoE Thursday, post-CPI uncertainty

  • SONIA futures closed on highs, IRPR showed near 50% odds for BoE +25bp

  • Hawkish Fed likely seals BoE +25bp hike, perhaps one more in 2023

  • Focus on BoE, particularly comments after decision; dovish lilt in face of hawkish Fed GBP unfriendly

Refinitiv IFR Research/Market Commentary
By Christopher Romano  —  Sep 20 - 02:10 PM
  • Fed left rates unch, said sees one more 25 bps hike by end of 2023

  • US yields US2YT=RR rallied as did the US$, EUR/USD spiked down

  • Fed said sees policy rate 50 bps higher through 2025 than June projection

  • Pair erased session's earlier gains, turned down and traded below 1.0675

  • EUR/USD fell below the 10-DMA & a daily gravestone doji candle formed

  • For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Sep 20 - 02:29 PM

Today's FOMC decision to keep interest rates unchanged was largely expected. However, CIBC notes that the bullish tone is set by the updated dot plot, which indicates that another rate hike later this year is still possible. The Fed also projects a stronger economic outlook for the coming years, and this was reflected in revisions to the median federal funds rate for 2024 and 2025.

Key Points:

  • Dot Plot: The FOMC's dot plot continues to show that another rate hike this year remains a possibility. The Fed also expects to maintain a higher rate for a more extended period.

  • Revised Economic Outlook: Projections for the U.S. economy were significantly revised for the years beyond 2023. The output gap is expected to be less negative, and the unemployment rate was revised down to 4.1% from 4.5% for end-2024 and end-2025.

  • Fed Funds Rate: The median projection for the federal funds rate was revised upward for end-2024 and end-2025 to 5.1% and 3.9% respectively. This suggests that the FOMC expects to hold the policy rate about 50 basis points higher by end-2025 than what they expected in June.


For Forex Traders:

  • USD Watch: The bullish tone from the FOMC could provide support to the U.S. dollar, especially if market participants were previously pricing in a more dovish stance.

For Policy Analysts:

  • Monetary Policy: The FOMC appears more confident about the U.S. economy's resilience, which could imply a less dovish stance moving forward.

For Investors:

  • Rate-Sensitive Assets: Given the possibility of another rate hike and a higher long-term rate, investors should adjust portfolios to mitigate risks related to higher interest rates.

The Takeaway:

CIBC highlights that the FOMC's bullish tone could have broad implications for forex markets, economic policy, and investment strategies. The likelihood of another rate hike this year and higher rates in the long term may require adjustments in market expectations and portfolio allocations.

CIBC Research/Market Commentary
By Christopher Romano  —  Sep 20 - 09:55 AM

Corrects typo in headline

EUR/USD traded up Wednesday ahead of the Fed's policy decision and shorts may have to be on alert for a bigger squeeze should the U.S. central bank's message fail to provide new inspiration for hawkish expectations.

Probabilities imply the Fed will hold rates unchanged so the Summary of Economic Projections and Fed Chair Jerome Powell's news conference will be key.

Investors have largely priced in expectations for the Fed to remain higher for longer as recent U.S. economic data indicated a lower probability of a recession.

Treasury 2-year yields US2YT=RR haven't been able to pierce July's high despite upbeat data while March 2024 SOFR futures prices SRAH24 have failed to make new down trend lows.

Interest rate markets are indicating they expect no further Fed rate hikes.

If the Fed's SEP and Powell's presser do not deliver a more hawkish message, U.S. interest rates may slide and take the dollar down as well as some of the U.S. currency's yield advantage diminishes.

yield spreads US2DE2=RR have tightened recently, which helped EUR/USD hold above support near 1.06353 and further spread tightening could provide a tail wind for EUR/USD bulls.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Sep 20 - 10:45 AM

Credit Agricole sees potential for Japanese foreign exchange intervention should the USD/JPY exchange rate make a rapid move above 148. Two key events that could trigger such a move are the FOMC meeting today and the BoJ meeting on Friday.

Key Points:

  • Intervention Triggers: A rapid ascent in the USD/JPY rate above 148 could prompt Japan to intervene in the forex market.

  • Excessive Volatility: Former BoJ Governor Haruhiko Kuroda had previously highlighted 2-3 big figure moves in USD/JPY within a trading day as excessive. This standard appears to have been adopted by Japan's policymakers.

  • FOMC & BoJ Meetings: These upcoming meetings are the two main catalysts that could lead to forex intervention by Japan.

  • Past Precedents: There have already been two FX interventions in 2023, and both occurred around similar dual events – a hawkish FOMC and dovish BoJ.


For Forex Traders:

  • USD/JPY Watch: Keep an eye on the 148 level for USD/JPY, as breaking this level could lead to intervention from Japan, potentially leading to significant volatility.

For Policy Analysts:

  • Intervention Policies: The meetings could serve as a litmus test for Japan's willingness to intervene to stabilize its currency.

For Investors:

  • Risk Management: If you hold positions in JPY or related assets, consider the risk of intervention and its potential impact on your portfolio.

The Takeaway:

The simultaneous hawkish stance of the FOMC and dovish stance of the BoJ could create conditions ripe for a Japanese FX intervention. Forex traders and investors should keep a close eye on the USD/JPY exchange rate around the times of these key meetings.

Crédit Agricole Research/Market Commentary
By Paul Spirgel  —  Sep 20 - 09:50 AM

GBP/USD held lower on Wednesday, recovering from the low of 1.2334 it hit after unexpectedly soft UK CPI shifted UK rate expectations lower, with traders unwilling, for now, to engage in a wholesale repositioning before the Fed's policy announcement.

The hawkish hold that many are expecting from the Fed could lead sterling to drift lower as U.S.-UK rate spreads widen, though there are risks on both sides.

Though UK CPI came in well below forecast the reaction may have been tempered by UK policymakers' recent comments suggesting the possibility of a faster fall in UK inflation, which might lead to a more-dovish BoE policy tack.

While FX traders were unwilling to go all-in offering GBP/USD, until learning the Fed's plans for rates UK rates traders showed no such reticence.

UK 3-month SONIA 0#SON3: futures surged higher, reflecting bets on a more dovish BoE in the near-term, and potentially a rate hold on Thursday IRPR.

Such an outcome from the BoE meeting could push GBP/USD below today's post-CPI low 1.2334 toward May lows near 1.22 and depending on the tone of Fed and BoE guidance, March 2023 lows by 1.1780.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary
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