Market Overview: USD and G10 Currencies in Focus
As the North American trading session is poised to begin, the US dollar remains largely steady against most G10 currencies. Although the greenback experienced some incremental gains following yesterday’s rally, the movement has been limited. Notably, the dollar’s upward momentum against the Japanese yen persisted, touching JPY157.80 before retracting to approximately JPY157.10, where it found support during European market hours.
Yesterday’s FOMC minutes increased skepticism regarding a rate cut in the near term, a sentiment reinforced by Nvidia’s earnings report and forward guidance, which collectively shaped the trading backdrop today. Equity markets in the Asia-Pacific region demonstrated robust performance, with Taiwan leading with a 3.2% advance and the Nikkei gaining 2.6%. Conversely, Chinese equities in both mainland China and Hong Kong declined.
In Europe, the Stoxx 600 index recovered from a five-day losing streak, climbing nearly 0.8% during late morning trading. US futures suggest Wall Street is set for a higher opening. Meanwhile, Japan’s significant fiscal stimulus is continuing to exert downward pressure on Japanese Government Bond (JGB) yields, although the 10-year JGB yield edged up by five basis points today. European bond yields firmed slightly, with the exception of UK Gilts, which remained relatively flat. The US 10-year Treasury yield remained stable near 4.13% to 4.14%. Gold softened to around $1,965, while January WTI crude oil consolidated just below the $60 mark, close to its 20-day moving average.
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US Dollar
The Dollar Index advanced by approximately 0.65% yesterday, marking its largest single-day gain since late September. More notably, it closed above the 200-day moving average for the first time since early March. Today, the index nudged slightly higher but failed to reach this month’s high near 100.35. The next key technical resistance lies around 101.55, coinciding with the 38.2% retracement level of the year-to-date decline.
The September US employment report, delayed until today, is drawing considerable attention. Bloomberg surveys forecast a 55,000 increase in total nonfarm payrolls (compared to 22,000 in August), with private payrolls expected to rise by 68,000 (versus 38,000 in August), in contrast to the ADP estimate of a 29,000 decline. The unemployment rate is projected to remain steady at 4.3%.
Federal Reserve Governor Waller has argued for another rate cut next month due to a stalling labor market, even as the weakness is not yet fully apparent in the data, and he suggests overlooking tariff-related price hikes. Employment figures are generally viewed as lagging indicators, especially for September, implying that barring significant surprises, these data are unlikely to shift market or central bank expectations markedly.
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Euro (EUR)
The euro eased to just under $1.1520 yesterday, reaching a nine-session low and breaking below the 61.8% retracement of this month’s earlier rally. Continued pressure extended the decline to $1.1510 today, with the psychological $1.1500 level now a focal point. Options expiring today and tomorrow aggregate around 3.4 billion euros at or near this level, signaling potential technical support or resistance.
The price trajectory has weakened technical conditions, with momentum indicators hinting at further downside risk. After last week’s crossover of the five-day moving average above the 20-day moving average—the first since late September—this short-term average is now threatening to fall back below the longer-term average. The monthly lows hover around $1.1470, while previous lows in late July and early August were marginally below $1.14, near the 200-day moving average.
Eurozone construction output for September declined by 0.5%, although Q3 activity was flat, marking the first quarter this year without contraction. With Q3 GDP data already available, these figures are unlikely to materially impact market sentiment or ECB policy expectations. Market attention remains on tomorrow’s preliminary November Purchasing Managers’ Index (PMI).
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Chinese Yuan (CNY)
Alongside its broader depreciation, the US dollar extended gains for a fourth straight session against the offshore yuan (CNH), briefly surpassing CNH7.12 and settling above the 20-day moving average near CNH7.1160. The CNH7.12 level corresponds to the 61.8% retracement of this month’s dollar decline, with the next resistance near CNH7.1275.
In response, the People’s Bank of China (PBOC) raised the official reference rate for the dollar to CNY7.0905 from yesterday’s 7.0872, marking the third consecutive increase—its longest run since April. Meanwhile, China maintained its loan prime rates steady at 3.0% for one-year loans and 3.5% for five-year tenors, following only one 10 basis point cut earlier this year.
Pressure mounts on China to both stimulate domestic consumption and reinforce yuan strength, a challenge compounded by export controls imposed by major economies including the US, Europe, and Japan.
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Japanese Yen (JPY)
The US dollar climbed to about JPY157.20 in the North American session yesterday, building on modest gains recorded during European trading hours. The pair peaked today near JPY157.80 before stabilizing, approaching, but still below, the yearly high of JPY158.90 seen on January 10. The 2024 peak reached nearly JPY162.
For the first time in over a month, the dollar settled significantly above the upper Bollinger Band (approximately JPY156.85). The yen’s weakening trend is impacting market expectations for Bank of Japan (BOJ) policy. Despite eight consecutive days of declining rate cut odds, market swaps modestly increased the likelihood of a BOJ hike next month from just below 30% to slightly above 33%, although this has declined to near 20% today, notwithstanding comments from an official suggesting a December rate hike remains possible.
The US 10-year Treasury yield premium over Japan’s 10-year bond was around 358 basis points in mid-January (the year’s peak), dropping to about 230 basis points last month—the lowest since April 2022—and currently near 232 basis points. Japan’s 30-year government bond yield has risen for the sixth consecutive time this year, recently surpassing the 3% threshold in 2024, following earlier milestones of 1% in 2022 and 2% in 2023. Despite predictions that such thresholds would deter Japanese investors from exporting savings, recent weekly averages indicate increased foreign bond and equity acquisitions by Japanese holders compared to last year.
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British Pound (GBP)
Sterling peaked near $1.3215 last week but has since failed to sustain gains, posting a series of lower highs. Yesterday saw a breakdown beneath support levels, falling through the previous Thursday’s low near $1.31 to almost $1.3050. The pair briefly dipped below $1.3040 today before recovering to session highs around $1.3085. This remains above the month’s low near $1.3010 from early November. The 50% retracement of this year’s rally lies about $1.2945.
Economic data releases are anticipated this week, with yesterday’s CPI report, tomorrow’s retail sales, and preliminary November PMI due. Market pricing reflects nearly an 88% probability of a Bank of England (BoE) rate cut next month—up from about two-thirds at the end of October—potentially lowering the base rate to 3.75%. Further cuts remain on the table, with approximately a 40% chance of additional easing before year-end 2025.
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Canadian Dollar (CAD)
Despite a modest 0.4% decline yesterday, the Canadian dollar remains one of the relatively stronger G10 performers. The US dollar reached a near eight-day high of about CAD1.4065 yesterday, a level that has been defended so far today. The CAD1.4075 area corresponds to the 61.8% retracement of the US dollar pullback from the seven-month peak at CAD1.4140 recorded earlier this month. The midpoint of this year’s trading range stands near CAD1.4165.
Canada’s economic releases this week include October’s industrial product and raw material prices, neither of which are expected to significantly sway markets. October’s CPI data, released earlier this week, showed a modest 0.2% monthly increase, equating to a 2.2% year-over-year pace. Market pricing currently discounts the conclusion of the Bank of Canada’s (BoC) easing cycle last month, with nearly a 25% chance of a hike in the last quarter of 2026.
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Australian Dollar (AUD)
The Australian dollar found its nadir yesterday near $0.6450 after European markets closed, the lowest level since October 17, briefly dipping below the 200-day moving average (~$0.6460) intraday—the first such occurrence in the second half of 2024. Today, the AUD is confined to a narrow range between approximately $0.6470 and $0.6490, with options totaling around A$735 million expiring at $0.6500.
October lows, recorded between $0.6540 and $0.6545, lie above current prices, with a further decline potentially opening the door toward $0.6400. This level represents roughly the 38.2% retracement of the year-to-date rally and previously provided support in July and August.
The year’s peak was set on September 17, just above $0.6705 (coinciding with a Fed meeting). Since that time, the AUD has staged three rallies, each stalling at progressively lower highs. Momentum indicators have turned negative, and the five-day moving average has slipped below the 20-day moving average.
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Mexican Peso (MXN)
The US dollar reached a peak near MXN18.4920 on Tuesday before reversing lower that day. Selling pressure continued into yesterday, driving the dollar to roughly MXN18.3050, before recovering and settling above MXN18.36. So far today, the USD/MXN has been range-bound between MXN18.33 and MXN18.37. Recent lows from late last week and early this week hovered around MXN18.2980 to 18.3015.
Options worth approximately $520 million expire today at MXN18.30, making this a crucial technical and psychological level. A breach below this zone could target last week’s low near MXN18.2530 or ultimately the year’s low from September 17 at MXN18.20.
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_This analysis is provided for informational purposes and does not constitute financial advice._
