Intro
It was a rather strange week as we saw a huge gap (very rare) on JPY pairs. This was likely caused by the election of Sanae Takaichi as the LDP leader.
The natural assumption is always that the market somehow closes the gap. Of course, such thinking is highly speculative. To me, this event is pointing towards potential bearishness in the short term, although my overall fundamental picture for the yen remains neutral.
USD was surprisingly bullish, but this was against the likes of AUD and NZD, both of which aren’t individually that strong.
Thankfully, there are no notable high-impact news events to consider this week; so everything should primarily be driven by the technicals.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
The Fed cut 25 bps last month and officials (e.g., NY Fed’s Williams) are openly backing more easing this year as labor risks rise, compressing U.S. yield support. Markets now treat rebounds as data-dependent squeezes rather than a turn in trend.
Key news to watch: Initial Jobless Claims on Thursday
Euro (EUR): Bullish
The ECB held in September and recent minutes/remarks frame policy as “appropriate” with inflation near target – i.e., patience rather than pre-signalled cuts. With the Fed easing first, relative stance gives EUR a modest floor on dips.
British Pound (GBP): Neutral
The BoE cut 25 bps to 4.00% in August, then kept Bank Rate at 4.00% in September (7–2 vote), signalling a slow-walk easing cycle while services inflation stays sticky and QT continues. That mix caps topside but underpins GBP on pullbacks.
Key news to watch: unemployment rate on Tuesday
Japanese Yen (JPY): Neutral
Japan’s inflation pulse remains above target (core 2.7% y/y in Aug; wholesale 2.7% in Sep), and the BoJ’s July outlook projected core CPI 2.5–3.0% for FY2025. This keeps further normalization in play. If the Fed cuts while BoJ edges forward, spreads narrow, a tailwind for JPY from weak levels.
Australian dollar (AUD): Neutral
The RBA held at 3.60% on Sept 30, warning Q3 inflation may print hotter after August CPI re-accelerated to 3.0% y/y; that keeps near-term easing on ice. Without a durable China/commodities upswing, AUD strength looks tactical rather than trend.
New Zealand dollar (NZD): Bearish
As predicted, New Zealand’s central bank delivered a 25 bps interest rate. The RBNZ’s recent Monetary Policy Statement clearly points toward additional easing down the line to maintain inflation and boost the economy. All of this leaves the kiwi firmly bearish unless a notable global risk-on turn happens.
Canadian dollar (CAD): Neutral
The BoC cut 25 bps to 2.50% on Sept 17 and said it’s ready to go again if risks rise; softer domestic data drove the move. Oil provides some cushion, and with the Fed easing too, USD/CAD dips find a mild tailwind, but broader risk tone still rules day-to-day.
Swiss Franc (CHF): Bullish
The SNB held at 0% on Sept 25 after a long cutting cycle and highlighted tariff headwinds to growth; safe-haven demand remains a structural support. Officials are still ready to smooth FX moves, so expect a firm – though not one-way – franc.
