The US dollar's aggregate long position increased by $ 4.2 billion in a week after two weeks of decline. This surpassed the recent high in late August and reached +14.178 billion, which is the highest level since March.
Apparently, investors were preparing for the hawkish results of the Fed meeting and are counting on the growth of the dollar. Concerns about China's real estate sector, which is currently experiencing serious problems, may also have played a role.
Commodity currencies are mainly weakening. It can be noted that the first signs of a counter-movement on the NZD and AUD have appeared, that is, the probability of an upward reversal of the AUDNZD has increased.
In any case, the US dollar remains the favorite of the currency market. It will likely compete with the yen, which is the only one that has grown against the US dollar. There is no clear direction according to the criterion – "buying/selling risk" since the franc was sold amid the yen's growth, and gold lost 4.192 billion, which indirectly also indicates the probability of dollar growth.
The anti-risk sentiment is possible to rise by the end of the week since the US Congress needs to raise the public debt ceiling no later than Thursday. The absence of a decision will lead to a halt in the government's work. Powell and US Treasury Secretary Yellen will make a joint speech before Congress on Tuesday to persuade Congressmen to decide on a debt ceiling because public finances will be used up no later than the second half of October.
In terms of macroeconomic data, all attention today will be directed to the publication of a report on the demand for durable goods. On Thursday, we have updated data on GDP for Q2. This may lead to an increase in volatility on Friday. In addition, personal income deflators, and PCE, as well as production ISM will be published. Let's also not forget about the power of verbal interventions – 13 speeches of Fed members are scheduled for this week.
The main political event of the eurozone is the elections in Germany. The first results give the advantage of the SDP party, while the CDU/CSU bloc (Merkel's party) is slightly behind. The question of who will form a coalition remains open. If this is a joint venture, then the transformation of the Eurozone into the United States is possible, which is supported by French President Macaron and is regarded as a bullish factor for the euro.
According to the CFTC report, the long position in the euro was reduced by 2.23 billion, falling to 1.77 billion. Apparently, the probability of new growth in the euro becomes even less. The target price turned down, which is an obvious bearish signal but is still above the long-term average.
The euro has been declining since the beginning of September. The bulls clearly failed to organize a full-fledged upward pullback, so taking into account changes in the futures market, the probability of further decline becomes higher. We expect that an attempt will be made to test the support zone 1.1665/85, which has a good chance of being successful. The long-term target is 1.15.
The Bank of England's meeting last week was ignored since it was not accompanied by a press conference by the head of the BoE and the publication of updated forecasts. Nevertheless, it received its share of attention due to a hawkish accompanying statement. As follows from the text, there are more arguments in favor of the rate increase, and the first increase is possible even before the end of the QE program. The results of the meeting give the pound a chance to resume growth, but this requires more precise formulations. Perhaps, they will be voiced by the BoE Governor Bailey, who is scheduled to make a speech today.
The weekly change in the pound was -432 million. The net long position was liquidated, but the bullish advantage was already small. The estimated price is still significantly higher than the long-term average, but there is much less confidence that the pound will be able to develop an upward correction.
The pound sterling has no direction at the start of the week, but the continuation of the decline in order to test the next two support levels of 1.3600 and 1.3575 is slightly more likely. A successful test will technically mean an increase in bearish pressure.