FX Daily: Nervousness continues
At a Glance
The desk maintains a bullish stance on the USD, driven in part by recent volatility in the USD/JPY pair that has raised intervention concerns, as detailed by the recent report from ing-think. Market reactions to the ISM services report, anticipated to remain steady at 54.1, could impact the Fed's outlook on rate hikes, with any notable deviation possibly reinforcing USD strength. Current forward rates suggest continued upward pressure on the dollar, despite modest dips in market expectations surrounding further tightening. As such, we see room for gains relative to currencies with weaker domestic narratives.
Key Takeaways
- 01USD bullishness remains despite mixed labor market signals.
- 02Rising back-end yields continue to support the dollar's upward trajectory.
- 03Intervention risks in USD/JPY represent a volatile sentiment shift.
- 04Upcoming ISM report may serve as a catalyst for market direction.
Full Analysis
What the desk is arguing
The desk frames this as a strategic moment for the USD amid mixed economic signals, particularly following intervention fears from the sharp move in USD/JPY. Per the full note from ing-think, the recent data on US jobs (ADP at 38k) has slightly dampened expectations, but the overall environment supports a bullish USD outlook.
Current market conditions indicate that the Fed's resolve against rate cuts remains firm, especially with rising back-end yields and potential inflationary pressures visible in the global context. This environment suggests that despite some profit-taking in USD positions, the fundamental backing is still strong.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.1700, with a range from 1.1200 to 1.2000, showcasing divergent views among banks such as nomura (targeting 1.2000) and rbc (targeting 1.1700).
This bullish outlook on the USD contrasts with the median expectations, where various institutions like hsbc and ucl are more conservative at 1.1100 and 1.1288 for December 2026, respectively. Our view remains aligned with the higher end of the spectrum.
How other firms see it
Several banks align with our bullish outlook on the dollar, including rbc and nomura, who project higher targets into 2026. Contrarily, firms like stanchart and hsbc suggest cautious positioning, proposing lower targets for the EUR/USD pair, indicating a more subdued view on the dollar's trajectory.
Key pairs like USD/CAD and USD/JPY also provide relevant context, where the reactive nature of USD/JPY to intervention hints at external pressures potentially influencing broader USD sentiment moving forward.
Market Implications
Watch for the upcoming ISM services report; any unexpected results could shift dollar sentiment significantly. The current level of USD/JPY around 161.28 suggests heightened focus on interventions that could either stabilize or further complicate dollar positioning, especially if yields rise steeply.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
BNP Paribas | Bearish | 1.1500 |
UBS | Bullish | 1.1800 |
UOB | Bullish | 1.1800 |
From the original
Articles FX Daily: Nervousness continues Published 07:45 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The FX space was shaken by a sharp move in USD/JPY yesterday, which prompted intervention fears. Today’s calendar includes US ISM service
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